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Market Recap – January 17, 2023

Keel Point

January 17, 2023

The December CPI inflation report last week showed inflation continuing to decline and boosted market confidence as fourth quarter earnings reporting began.

  • The 0.1% m/m decline in headline CPI in December was principally due to a 9.4% m/m drop in gasoline prices, and core consumer prices also increased by a more modest 0.3% m/m, extending the run of weaker monthly gains to three.
  • The three-month annualized CPI core inflation rate slowed to a 20-month low of 3.1%, from a peak of 7.9% last June. Excluding housing, CPI core services inflation was up only 0.2% m/m in December.
  • December’s jobs and inflation data are both supporting the soft-landing scenario advocated by some analysts. The last six month of US inflation data shows a run rate of under 2% inflation. Real average hourly earnings show a 2.3% three-month annualized rate as of December.
  • U.S. Treasury markets are showing no inclination to retreat further on the recent lower inflation data and so are likely to fall only a little further this year.

China is beating economic rebound expectations as it comes out of its zero-Covid policies.

  • High frequency data show that a significant economic recovery is already underway, boosting the “China Activity Proxy measure from 2% to 5.5%.”
  • The rebounding economy is likely to increase China’s energy consumption which had declined last year because of lockdown and lower production and demand. This will put upward pressure on global energy demand and prices.

Consumer confidence increased in January to a nine-month high, but still remains below its levels at the beginning of the pandemic and is mostly in line with its averages during the financial crisis. (U of Michigan)

 

Disclosure: Securities offered through Keel Point Capital, LLC, Member FINRA and SPIC. Brokerage and Investment advisory Services are offered under the Keel Point brand. Investment Advisory services offered by Keel Point, LLC an affiliate of Keel Point Capital, LLC. While reasonable efforts have been made to provide data from sources considered to be reliable, no guarantee of accuracy is given. Keel Point does not give tax, accounting, regulatory, or legal advice to its clients.

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