In spite of the market challenges, companies set a new record in 2022 for repurchasing their own shares.

 

 

The dollar index (DXY) has entered a death cross and broke below the near-term uptrend support.

 

 

High-yield bonds have been rallying with stocks.

 

 

Global oil production:

 

 

Morgan Stanley expects the dollar to weaken sharply this year.

 

 

US Economy

 

  • The U. Michigan consumer sentiment index improved this month, topping expectations.

 

 

  • The U. Michigan’s 1-year consumer inflation expectations declined further, but longer-term inflation projections edged up.

 

Source: Reuters   Read full article

 

 

  • How does the current inflationary spike compare to the 1970s?

 

 

  • Next, let’s take a look at recession risks.
  • Leading indicators continue to point to a substantial GDP contraction.

 

 

  • Deutsche Bank expects a deeper recession than the consensus.

 

 

 

 

  • Over $1 trillion of student debt is in forbearance (and rising). At some point (perhaps this summer), payments will become due.

 

 

  • The first manufacturing report of the month was a disaster. The NY Fed’s regional factory activity index dipped to the 2008 lows.

 

 

Source: MarketWatch   Read full article

 

  • This is bad news for manufacturing at the national level (ISM).

 

 

  • By the way, softer manufacturing activity in China also doesn’t bode well for the ISM index.
  • Demand deteriorated.

 

 

  • Hiring slowed as factories cut workers’ hours.
  • The market is betting that the Fed will blink before reaching 5% on the fed funds rate.

 

 

  • Economic activity in the US has taken a marked downturn. December retail sales surprised to the downside.

 

 

  • The December PPI report surprised to the downside. Gains in core producer prices continue to slow.

 

 

  • Falling core PPI is good news for consumer prices.

 

 

  • Treasury yields declined further amid recession concerns.

 

 

  • The yield curve inversion (10-year vs. 3-month) deepened to record levels.

 

 

  • Housing starts registered their first annual decline since 2009.

 

 

  • Homebuilders have been cutting prices.

 

 

  • Consumers now expect home prices to be lower in 12 months.

 

 

Quote of the Week

 

“Debt crises are inevitable. Throughout history, only a very few well-disciplined countries have avoided debt crises. That’s because lending is never done perfectly and is often done badly due to how the cycle affects people’s psychology to produce bubbles and busts.

Most debt crises, even big ones, can be managed well by economic policymakers and can provide investment opportunities for investors if they understand how they work and have good principles for navigating them well.”

– Ray Dalio

 

Picture of the Week

 

 

 

All content is the opinion of Brian J. Decker