 Okay, hello and welcome to briefing looking at the week ahead Then it's Sunday night 23rd of January just gone through electronic open 11 p.m. Here in London So yeah in terms of this week plenty of things to get your teeth into which we're gonna Briefly recap in a moment main highlights being the FMC meeting on Wednesday You've got PMI and GDP data coming out from much of the major Western developed world economies We've also got the latest corporate earnings the big tech names to look out for include the lights of Microsoft Apple We also have Tesla as well this week And so I'm gonna run you through a few top level ideas about what to expect in those events And then we'll look at the markets and how they've opened In electronic trade to get things underway for the week But starting off with really how last week finished just to set the scene and of course global stock suffered their worst week since October of 2020 as you can see here and of course It's the likes of the NASDAQ which have really felt the brunt of course here this pink line the divergence Increasing of course away from that of the S&P 500 albeit all the indices have been moving lower But more prevalent of course in the likes of the growth and tech names those more sensitive to the higher yield environment and of course that is what we've been seeing real yields are spiked higher as People start and have been positioning themselves accordingly for the Fed which we're gonna hear the announcement from from the January meeting this Wednesday what this means then looking forward is first off how markets open this evening and Yes, we did gap a little lower But we've already kind of moved higher straight away in Electronic trade to get things underway and I'm gonna focus on the NASDAQ given that that's been the main index of focus In the futures market here and just looking on a daily chart really to give the the best context of what we're looking at at the moment And you can see here quite a critical level that we're looking at in the NASDAQ just to briefly show you here the context of this trend line that we've had going back to November of 2020 and Yeah, the biggest sell-off that we've had As per what I've just mentioned from last week was really down in this October period when we're seeing these these sell-offs here So that was really then the commencement thrashing out that low going into the turn of November 2020 Which we've tested multiple times. We obviously broke through much earlier About a week or so ago Actually, it was this time last week when we broke that and that added to the weight plus the 200 DMA break and Through the 15,000 psychological level is really what weighed at the back end of last week on some of these tech stocks And you can see here this critical line of support where we're at at the moment. We found a bit of a bounce and rub about 70 Points here at the initial futures open, but 14 369 and a half was that low point that we printed back at the beginning of October And that's a key level here because any further break of that next era I'd probably be looking at is the peak of the price action going through April of 21 And also a support point through the back end of June before we eventually moved up through all-time highs Anything beyond that for the rest of the week and kind of scaling that move down to those June lows, which was also that Jan or mid-feb higher than 2021 and then just using the various other key levels here on the downside So yeah, obviously the Fed is going to be key to this. What's obviously quite interesting is we've had a sizeable correction here in markets and going off the peak that we printed in the NASDAQ from the 22nd November So where we've printed a loan opening of trade this evening with that about 14 and a quarter percent And so the question mark really is of how much of this is now already priced in for a March hike And is comfortable of the nature of hearing some more clarity over the what they're going to do with the balance sheet In future given the idea then that it probably won't be completely shrinking with the balance sheet immediately with the first March hike And so therefore how much of this 14% pullback is Reflective now of the ability for the Fed to really give clarity of direction on their tightening going forward Much more so than their projections which came out in December and thus actually is this the near-term kind of bottom for the time being Time time of course will will tell but sticking with the stocks themes one thing I didn't mention in my notes, which you can check out. I'm pointing to here Which is my Twitter handle and there's a really good article here Which? covers a couple of interesting things. I just wanted to run through them from a statistical point of view and one was that Essentially, we've had a really rough start to the year of 2020 as the markets are kind of readjusted themselves for the idea of a faster tightening pace coming from the US central bank, but in fact stocks have risen at an average annualized rate of 9% during the 12 Fed rate hike cycle since the 1950s delivered positive returns in 11 of those instances This was quoting a fund manager and a study that was issued in a Bloomberg article over the weekend and If you want to have a look at some of these tables in more detail I did I did share them with my notes and my Twitter account, but you can see here is that the idea basically is that Can you have high yields a tightening of policy and positive stock performance? Well, the history would say yes and the main point of that being that the growing economy Tends to support corporate profit growth and thus then the stock market now you could argue that look We're in a bit of an unprecedented point here because we've obviously come such a a long way so quickly Given the dual mechanism of you know, just humongous fiscal Injections that we've seen to offset and counteract the downturn in the pandemic Coupled with these incredibly Accommodative policies from the Fed, but you know, let's see and and it's really going to be quite important although we've had some short-term pain one thing to also reiterate is that on average Strategists on the street at major US banks do project the S&P 500 will finish this year at around 4 982 so just short the 5000 level and of course we're trading at the moment the futures are below 4400 so is this the pullback of which, you know, we had some very shallow pullbacks last year Which we'll get to in a moment, but Looking at where we closed on Friday to then the average estimate of what strategies looking at the end of this year You're talking about around 13% move back to the upside from where we're at this present point in time Although the S&P 500 performance is often strong during a right-high cycle The unusually mild pullbacks that we did experience of course in 2021 Would suggest looking at when this has happened before in the previous 50 to 70 years That actually the ensuing or the following year then sees a heightened degree of volatility. So hence Pullback cycle we've had a 15% pretty much straight out of the gate in the first month of this year Perhaps aren't going to be uncommon going forward albeit that the end destination might possibly be higher I would say Although there's obviously a lot to play for we've got 11 months to go and obviously there's multiple rate hikes to execute But the readjustment to the first one is always going to be the most painful in my opinion because then The stall is set out and the market know the relative number of hikes and the approximate timeline of shrinking of the balance sheet Details of that are still to come which means that short-term there could be more volatility But a lot of that would spell that you know this perhaps is the worst of it that we're going through at the moment the readjustment phase Couple of things as well not forgetting. We do of course. It is a US mid-term Year at the moment and so if you actually look at the Statistics and we start looking at big mid-term swings i.e. looking at the S&P 500's performance Pullbacks in the US mid-term election year. So since the 1950s The S&P 500 has averaged an entry year pullback of around 17% in mid-term years This is according to LPL financial and if you haven't checked those guys out, definitely should they put out a really good newsletter Actually, but the final three months of a mid-term year. So remember the midterms in November So the finals three months and then the first two quarters of the following year So once the result of that is known As the pre-election year have been some of the strongest quarters for stocks over the four-year US presidential cycle And so yeah, let's see how this plays out But I think it's just some good statistical background towards how we tend to perform In these previous periods of conditions that might have some degree of similarity So just something to bear in mind a quick look at the overall calendar And then I'm going to delve into three or four couple of key points rather than go to everything in great lengths first off Monday Obviously Sunday night come out to midnight here in London. I'm filming this but come to our Monday morning session We're going to get the flash PMI figures. So service manufacturing data for the month of January So across the UK Europe and the US then if we go into Tuesday We get German iPhone and US consumer confidence figures Wednesday, of course the FMC from the Fed We also get the Bank of Canada rate decision where analysts at ING are expecting the BOC to raise rates 25 basis points This meeting of course same day as the Fed They suggest that activity has been strong the economy is at record employment inflation is at a 30 year high Covid containment measures are also set to be eased at the end of this month And they should signal essentially the green light to start hiking rates in Canada at this point Then Thursday you get US GDP This is the advanced Q4 reading expected to show expansion of around 5.6 percent in Q4 much higher than the prior quarter of 2.3 percent we had in Q3 Fueled mainly by a pick up in inventories and modest gaining consumer spending is the rationale there We get your weekly jobless claims as well as debt durable goods on the same day and then Friday We get things like the personal income consumption numbers employment cost index coming out the US This is the final University of Michigan number. So not too much interest there, but we do then get The GDP numbers as well coming out of Europe where I just flip over to here This is looking at the PMI numbers for the Eurozone So as I said, we're gonna get these Monday GDP data comes towards the back end of the week But GDP readings on Friday from Germany France Spain will likely show how badly Omicron variant has hit that particular part of the the Western economies over the period of the fourth quarter Germany is certain to have contracted is the general expectation Setting Europe's biggest economy up for a recession, whereas the other two so France and Spain expected to still be growing Or be it at a slower pace than the previous three months now when it comes to the PMIs Economic confidence and PMI data will provide us with some early indications then of the Euro area has it picked up this month Or does it remain somewhat subdued obviously in France things like Omicron variant case rates are still particularly high But perhaps not so much so in some of the other areas One interesting comment we had out of Austria's Robert Holtzman. The reason why he's interesting is he is an ECB member and he said that In the local press in Austria that a return to conventional monetary policy Currently it is not possible in Europe and he's one of the most outlying hawkish members of the ECB Still sounding very dovish as you would pretty much expect So policy divergence a lot of that's already been factored in of course a few months back when we saw a big division and in general Weight in the euro-dollar pair. So not expecting that to play out too much But just goes to re-emphasize the state of play between the difference of policy Timings on those two central banks at this moment in time And then before I pivot back to the things like the FMC earnings This is the earnings kind of sheet if you like for the week. There's about 101 companies reporting But much of the focus, of course, it's going to come on the mega cap type names So to name a few you've got IBM aftermarket on Monday pre-market Tuesday Jane J G E Verizon AmEx 3m, but aftermarket obviously attention on Microsoft and then pre-market on Wednesday Boeing AT&T aftermarket Tesla always an interesting one, of course And then Intel and on Thursday you get Apple coming aftermarket McDonald's also join that day pre-market and then on Friday Chevron Caterpillar some of the headline names to look out for In terms of earnings season, where are we at the moment? So a couple of things to have a look at so we're here now going into the 101 So this is one the second most busiest week that we get in US earning season next week In fact is the busiest with 110 companies reporting But in terms of the men the big ones, of course over the coming days as you can see here And and as I've just mentioned the likes of Google Facebook Amazon will come next week Just as a reference point. So, yeah, moving back to a couple things to talk about obviously Jerome Powell Here he is the Fed decision definitely is the highlight of the week The Fed not expected to raise rates in this meeting But they could set the scene essentially for how it will act when it finishes up its bond buying program Likely now in March, of course many economists expect the Fed to start raising its federal funds rate target from near zero With a quarter percentage point hike in March And then subsequently carrying out then every kind of the quarter rate hike thereafter So June 7th back the Fed has also said it could move to shrink its balance sheet this year And it would be another type of policy tightening is how to basically take that as a central bank steps back from replacing Matureing securities on its balance sheet with market purchases to give you a bit of an idea on that side of things 29% of Bloomberg's economists surveyed expect the runoff to occur between April and June a Larger proportion 40% from July to September the median estimate looking for a monthly reduction Between 40 to 60 billion dollars bringing the balance sheet down to around eight and a half trillion By the end of the year from around just short of nine trillion eight point eight or so that it is Currently at this present point in time So you can see even though they're shrinking the balance sheet the number of the balance sheet is still absolutely huge at this point so Couple other things on the back of that was a latest economists know coming out of the the team led by Jan has he asked the chief economist at Goldman Sachs I don't think it's new information the fact that Goldman sits in the camp that sees four rate hikes for this year again Commencing a March June set deck They announced as far as a date They fit in that 40% camp from that Bloomberg economist survey that they think they'll start the Fed the reduction of its balance sheet in July But they said some interesting comments. They said that inflation pressures mean that risks are tilted somewhat to the Upside for their baseline and there is a chance officials will act at every meeting until the inflation picture changes Let me repeat that they said there is a chance that the Fed officials could act at every meeting Until the inflation picture changes. That's eight meetings. So again, they're just saying that as a as a non baseline hypothetical but nonetheless This raises the possibility of course of additional hikes and earlier balance sheet announcement in May And of more than four hikes this year as we just I just mentioned So yeah, the Fed really is the big one that's going to be coming out Wednesday What I'll do is I'll put out another video as a preview on the morning of Wednesday before that comes out And then I'll do a review the following morning on Thursday. So I've got you covered Don't worry Just having a look then at what else is to talk about But I think I've pretty much covered most things two other headlines just briefly One on US Russia relations just given the current status quo with the tensions in Ukraine the uptick We've had in geopolitics of late and US Secretary of State Anthony Blinken rejected pressure to immediately escalate sanctions on Russia For its military buildup around Ukraine saying it would limit Western options in the future So at the moment diplomacy rules fairly passive Somewhat diplomatic means being pursued at this point in time. You would kind of expect that to be The order of play as far as they can take it For the time being so at the moment I don't really see too much of an impact for markets as it is right now Certainly though any movement on that side energy prices to gas and so forth would be the things to look out for this week And then I just wanted to give a quick mention for Cryptocurrencies Solana one of the largest blockchain networks was hit by instability issues Over the weekend and they tanked pretty much and then just having a look at Bitcoin Yeah, after what's been a pretty horrendous time for the crypto space more broadly But if we look at the Bitcoin futures chart here on a daily, you can see we actually gapped down We were down in excess of 2000 at the open Just tracking some of the weekend movement that we'd seen in Bitcoin But quite interesting here if I just kind of zoom that in a little bit you can see we opened Below what is here these previous low that we printed back on 27th of July and at the close of last week And you can see we gapped down a rallied back up in the first half an hour of trade But we're finding a little bit of resistance at that same level It's gonna be a really interesting week to see how this performs because obviously now we're below there technically does open prospects of Perhaps deeper moves lower if we did The next real clear definable stop is 30 But I think it's kind of make or break here to a certain extent Do we get a pretty wicked pullback here back up towards the 40k mark or do we go 30? I'd say the way that this has been behaving I'd be surprised if we were to consolidate in a narrow 2 to 3k range. I think we're going 10,000 in either direction We might end up back around here But before then I think we're gonna see one or the other and perhaps the Fed meeting acts as a bit of catalyst for that on How much did I deliver when they comment on their hawkish intentions for the future midweek? So perhaps second half the week could be particularly telling in that regard Other things as well, of course, that's been weighing aside from just tracking some of the Rotation out of growth and things like that So also having a mimicking kind of movement in sympathy in the crypto space is regulated from Russia UK Singapore Spain They've all announced intentions that could undermine crypto companies looking to grow in those particular regions The Biden administration is also said to be preparing to release an initial government-wide strategy for digital assets As soon as next month and task federal agencies are assessing risks and opportunities that they pose According to people of middle of the matter was published in article in Bloomberg At the weekend this all of course comes after that aggressive move We've had in in yields, which has been predominant rationale for a lot of the weakness But look that is it. I'll leave it there Any questions at all? Feel free to drop me a comment as I said Intermitted with any big breaking news stories anything interesting or hot topics that come up during the week I'll put out a video, but I'll definitely have something for the Fed on the Wednesday preview and the review on the Thursday And then don't for don't forget to check out the podcast as well Just such amplify me market maker for your weekly wrap as well. All right. Have a good week Take care and I'll see you for the next session. Take care