Welcome to our #159 weekly newsletter.
“For women taking control of their financial future”
-Jana Hlistova
From The Purse
In this week’s newsletter, we focus on the global markets and why they are ‘rattled’ by the recent US inflation data. Investors are suddenly feeling anxious, as the Fed is likely to continue raising interest rates in 2023, and perhaps more than they had anticipated.
You can review the news in brief so you stay on top of global financial, economic and investing trends.
I hope you enjoy this week’s newsletter.
Until next week,
Jana
Global markets are rattled: US inflation is ‘sticky’
Investors are ‘spooked’ by US inflation which continues to go up, and the US dollar strengthens.
Markets around the world were rattled, wrapping up the worst week in 2023, as the key US inflation gauge defied expectations of a slowdown in January, as reported by CNBC and The Financial Times.
According to the US Bureau of Economic Analysis, the personal consumption expenditures index increased 5.4% on-year in January versus an expected slowdown to 4.9%.
Moreover, core PCE inflation, the Federal Reserve’s preferred price gauge, increased to 4.7% on-year in January, from 4.6% in December.
It follows, that the US Federal Reserve may have to keep rates higher for longer in order to control inflation growth.
According to James Knightley, chief international economist at ING:
“…the data will ensure the ‘Fed mantra of ongoing hikes’ continues, with 25 basis point moves in March, May and June now ‘fully priced’ by markets”.
And Liz Ann Sonders, chief investment strategist at Charles Schwab has said that she does not believe that inflation can come down without either a downturn in the economy or more specifically the labour market (which continues to go up).
She also believes that a lot of speculation has kicked in and:
“...the market tends to move in a contrarian fashion when sentiment gets a little too frothy...”
The US dollar strengthened as investors moved their money to a ‘safe haven’ again and money flowed out of risk-on assets including the crypto market (which shed $58bn this week).
Michael Burry, the legendary investor, has already shared a grim prediction for 2023:
a) the US economy will go into a recession
b) and inflation will peak ‘more than once’
c) which will cause the Fed to pivot and cut interest rates
d) forcing the government to stimulate the economy in order to help struggling households
e) meaning: “we are going to see a rehearsal of what happened after March 2020”.
As the US holds the world’s reserve currency and financial markets are so interconnected, this inflationary impact will continue to ripple through the entire financial system.
News in Brief
Financial news
S&P 500 and Nasdaq 100 slipped 2.7% and 3.3% in the worst week since December on hotter-than-projected inflation report and hawkish Fed minutes. Markets are rattled as bets are on Fed peak rate now at almost 5.4%.
Stocks in London closed in the red on Friday, as a key US inflation gauge defied expectations of a slowdown in January.
Eurozone inflation for January tops earlier estimate. CPI rose 8.6% in Jan year-on-year, up from 8.5% increase previous estimated. Core CPI, which strips out volatile categories, was 5.3%, up from preliminary estimate of 5.2% and fresh ATH. Core gives ECB hawks new fuel for more hikes.
Inflation will be harder to bring down than markets think. US 10 year inflation expectations (measured by inflation-linkend bonds) signal smooth decline towards 2%. So investors are betting on good times. The likelier prospect is turbulence.
Capital Economics predict there will be more pressure on the pound, and on shares, as traders recognise that the economy is weakening.
M&S appointment means it will have a female majority board. Private equity luminary Cheryl Potter as a non-executive director is joining the board, a move that will give its boardroom a female majority.
Crypto: bitcoin, ethereum, DeFi & NFTs
Bitcoin dips after key inflation indicator rattles market. Bitcoin currently down 6% in 24 hours, trading for $23,170, CoinGecko data shows. Last week, it broke above $25,000 per coin for the first time in eight months. Ethereum has shed approx 7%+ trading hands for $1,601.
Polygon CEO proclaims Ethereum as Layer 1 Future, dismisses Solana, Cardano, and Avalanche.
Arthur Hayes warns massive global crash incoming – here’s his Bitcoin and crypto strategy.
Apparent disappearance of Phoenix Community Capital leaves some investors fearing they have lost large sums of money (UK).
FTX founder Sam Bankman-Fried charged with 12 counts in new indictment. Bankman-Fried was previously charged with eight counts including fraud and money laundering in FTX collapse case.
Coffee Break? Read This
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