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MARKET MONITOR 
|
January 27

MARKET MONITOR | January 27

Chart of the Week


EQUITIES

We believe that the tide is turning in favor of equities outside the US, driven by an improving economic outlook, especially in the Euro area, and US dollar weakness. Historically, periods of US dollar weakness have coincided with strong performance for equities outside the US. In a world of heightened market volatility, we also believe that their elevated dividend yields may support total returns.

Source: MSCI, Bloomberg, and Goldman Sachs Asset Management.

Market Summary


GLOBAL EQUITIES

US equities rose last week, with economic data reflecting a resilient, yet cooling economy. Still, earnings releases demonstrated the challenges posed by tighter financial conditions for corporations, specifically in the form of broader layoffs. The S&P 500 finished up 2.48%, moving back above the 4000 level, with notable gains in the technology sector. European equities also rose, finishing up 0.69% as consumer confidence rebounded in the region. Read More

COMMODITIES

Oil prices were volatile last week as the market tried to digest China reopening and a Western macro slowdown. On the supply side, the EIA revealed that the increase in US crude inventories was significantly less than expected, providing a tailwind to prices. Ultimately, Brent and WTI closed at $86.66/bbl and $79.68/bbl, respectively. Gold prices closed flat at $1945.60/troy oz. Read More

FIXED INCOME

US Treasury yields ended flat last week, dipping at first on the back of challenged earnings and recession fears before rebounding following a better-than-expected US GDP print. Consequently, the 2-Year and 10-Year US Treasury yields narrowly rose 3 bps and 4 bps to 4.21% and 3.52%, respectively. The US Treasury yield curve remained deeply inverted, with the 2s10s spread at –69 bps. Meanwhile, the 10-Year German Bund yield held flat at 2.58%, even as resilient activity data fueled hawkish monetary policy concerns in the region. The 10-Year UK Gilt yield fell –6 bps to 3.32%. Read More

FX

Last week, the US dollar weakened slightly, depreciating –0.21% against a basket of currencies and continuing its now four-month-long trend lower, despite intraday rallies on the back of better-than-expected economic growth. In Europe, the euro and pound sterling ended the week largely flat at $1.0870 and $1.2393, respectively. Read More

Economic Summary


GROWTH

US real GDP rose 2.9% annualized in the fourth quarter of 2022, 0.3 pps above consensus expectations. Despite the headline beat, underlying data revealed a softer quarter. Consumption growth slowed to 2.1%, reflecting evolving consumer behaviors amid macro uncertainty. On the other hand, inventory growth represented nearly half of the increase and may be a subsequent drag in the first quarter of 2023. Overall, the GDP print provided a degree of optimism that the economy is cooling enough to slow inflation, but not so much to result in a recession. Read More

INFLATION

The Fed’s preferred measure of inflation, core PCE, increased at 4.4% YoY in December, in line with consensus expectations and below the November print of 4.7%. We expect the Fed to hike rates by 25 bps this week, further slowing its pace of tightening as past rate hikes take hold and inflation continues to moderate. Read More

ACTIVITY

The Euro area composite flash PMI increased to 50.2 in January, above consensus expectations. The increase was broad-based across sectors, with the services sector entering expansionary territory for the first time since July. We believe this print is another indication that Euro area growth prospects have improved significantly recently. By contrast, the UK composite flash PMI decreased by –1.2 points to 47.8, reinforcing our expectation that UK growth will underperform that of the Euro area, even with falling energy prices. Read More

LABOR

US initial jobless claims fell by –6k to 186k in the week ending January 21, significantly below consensus expectations of 205k. Some of the recent declines may be explained by seasonal adjustment issues, which we expect to continue through mid-March. Overall, the US labor market remains tight, even as other signs of inflation have cooled in the economy. Read More

Style Performance


US Equity Size & Style Returns

MONTH-TO-DATE

Large
4.77%
6.49%
8.33%
Medium
7.25%
7.58%
8.18%
Small
8.04%
8.58%
9.10%
Value
Core
Growth

YEAR-TO-DATE

Large
4.77%
6.49%
8.33%
Medium
7.25%
7.58%
8.18%
Small
8.04%
8.58%
9.10%
Value
Core
Growth

MSCI World Size & Style Returns

MONTH-TO-DATE

Large
3.76%
6.88%
10.14%
Medium
7.71%
8.31%
9.11%
Small
8.28%
8.76%
9.24%
Value
Core
Growth

YEAR-TO-DATE

Large
3.76%
6.88%
10.14%
Medium
7.71%
8.31%
9.11%
Small
8.28%
8.76%
9.24%
Value
Core
Growth

US Fixed Income Maturity and Quality Returns

MONTH-TO-DATE

Government
0.99%
1.47%
6.06%
Corporate
1.41%
2.31%
6.62%
High Yield
3.12%
3.87%
5.01%
Short
Intermed.
Long

YEAR-TO-DATE

Government
0.99%
1.47%
6.06%
Corporate
1.41%
2.31%
6.62%
High Yield
3.12%
3.87%
5.01%
Short
Intermed.
Long

European Fixed Income Maturity and Quality Returns

MONTH-TO-DATE

Government
0.49%
2.20%
5.66%
Corporate
0.87%
3.13%
5.60%
High Yield
3.19%
??????
??????
Short
Intermed.
Long

YEAR-TO-DATE

Government
0.49%
2.20%
5.66%
Corporate
0.87%
3.13%
5.60%
High Yield
3.19%
??????
??????
Short
Intermed.
Long

Source: Bloomberg and Goldman Sachs Asset Management (as of 01/27/23)

VIEW LESS DISCLOSURE

Key Economic Releases


Monday, Jan 30

Japan Retail Sales, month-over-month (Cons: 0.8%, Prior: –1.1%)

Tuesday, Jan 31

Euro area Gross Domestic Product, quarter-over-quarter (Cons: –0.1, Prior: 0.3%)

Wednesday, Feb 01

Euro area CPI YoY (Cons: 9.0%, Prior: 9.2%)
FOMC Rate Decision (Cons: 4.75%, Prior: 4.50%)

Thursday, Feb 02

BoE Rate Decision (Cons: 4.00%, Prior: 3.50%)
ECB Rate Decision (Cons: 2.50, Prior: 2.00%)
US Initial Jobless Claims (Cons: 200k, Prior: 186k)

Friday, Feb 03

US Unemployment Rate (Cons: 3.6%%, Prior: 3.5%)
US Change in Nonfarm Payrolls (Cons: 175k, Prior: 223k)

VIEW LESS DISCLOSURE

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