Pictet North America Advisors SA

2023 Weekly Views

Busy week for central bankers

Market update, Macroeconomy, Highlights, What to watch from the Investment team of Pictet North America Advisors.

The content of this document is for information purposes only and is not to be used or considered to be an investment recommendation, or an offer or solicitation to buy, sell or subscribe to any securities or other financial instruments. It does not take into consideration the specific investment objectives, financial and fiscal situation or particular needs of the addressee. It reflects PNAA’s beliefs based on its own views of the direction of the global macroeconomic market, its investment process and other relevant factors.


US earnings season

In the US, 29% of S&P500 companies reported so far, roughly 37% of its market cap. Earnings are beating estimates by +2.3%, with 65% of companies topping projections. In terms of sales, reports are beating estimates by 0.9% with 50% of companies beating expectations. In terms of growth, sales are up by 5.9% while earnings are contracting by -0.2% so far. 4Q expectations are for revenues and EPS growth of 4.2% and -2.4%. Ex-TECH+ results appear healthier, with top- and bottom-lines expected to jump 5.0% and +5.1%. Typically, 4Q estimates fall 4-5% prior to earnings season, and increase 2-3% once reports come in. 4Q22 estimates declined 8.1% prior to earnings season and have fallen an additional 50bps since, the result of weaker than normal beats and continued downward revisions for companies that have not yet reported. Overall, Growth companies are delivering stronger revenue and EPS growth (5.4% and +2.3%) than Value (3.5% and -6.7%) in 4Q. Growth results are beating by 4.6% vs. 1.0% for Value. More domestically oriented S&P 500 companies are delivering faster EPS growth than their more globally-oriented peers: +0.3% vs. -1.5%.

Market update

Busy week for central bankers

The S&P 500 closed the week at 4,070.56, +2.47% higher. The Dow Jones closed at 33,978.08, +1.81%, with the Nasdaq higher by +4.32%. The volatility index VIX closed the week at 18.51 down from 19.85. The Euro Stoxx 600 rose +0.67%.

The 10-year UST closed at 3.50% up from 3.48% a week before. The yield curve is inverted with the yield spread between the 3-month and 10-year UST at -117bps. US Corporate Bond spreads: Investment Grade tightened 7bps at 189bps and High Yield tightened 14bps at 462bps. German 10-year Bunds yield closed at +2.24% up from +2.18% a week before. In Europe, Corporate Investment Grade spreads tightened 5bps at 165bps and High Yield spreads tightened 9bps at 477bps.

The US Dollar Index (DXY) depreciated -0.08% last week and closed at 101.93. The Euro closed at 1.0868 (+0.11% weekly); the Yen depreciated -0.22%, closing at 129.88 and the Swiss Franc depreciated -0.04%, closing at 0.9210. Gold closed at $1,928.04 appreciating +0.10%. Oil was down, Brent closed at $86.66 (-1.11%) and WTI at $79.68 (-2.00%).


Central banks

A busy week ahead on the monetary front. The Fed will announce its interest rate decision on Wednesday which will be followed by Jerome Powell’s news conference. Investors expect the Fed to slow the pace of its monetary tightening to 0.25bps, raising rates to 4.75% to the highest level since September 2007, the start of the global financial crisis. The European Central Bank (ECB) is expected to hike rates by 50bps taking its reference rate to 3%. Several ECB members stressed to need to keep raising rates. Christine Lagarde said the ECB will do everything necessary to return inflation to its goal, pointing to more "significant" rate increases at coming meetings. Investors expect an additional 50bs hike at the March 16th ECB meeting. The Bank of England (BOE) is expected to hike rates by 50bps as well. Last week, the Bank of Canada (BoC) hiked its main policy rate by 25bps to 4.5%, as expected. This brings the cumulative increase since tightening commenced in March 2022 to 425bps. The BoC is now signaling they are done, with 4.5% likely a rate ceiling. “There is growing evidence that restrictive monetary policy is slowing activity, especially household spending. As the effects of interest rate increases continue to work through the economy, spending on consumer services and business investment are expected to slow. Inflation has declined from 8.1% in June to 6.3% in December, reflecting lower gasoline prices and, more recently, moderating prices for durable goods. Inflation is projected to come down significantly this year. If economic developments evolve broadly in line with the MPR outlook, Governing Council expects to hold the policy rate at its current level while it assesses the impact of the cumulative interest rate increases”.


Q4 US GDP growth came in at +2.9% q-o-q annualized, vs. +2.6% expected. Comparable GDP growth in Q3 was 3.2%. Consumption grew at 2.1% and Investment spending at 1.4%. Inventories grew by 1.5% and excluding its impact on the overall figure, business investments contracted -6.7%. Adjusting for Government spending, inventories and trade, final sales to domestic private purchasers grew a meager 0.2%.

Global PMIs

US Jan. composite flash PMI came in at 46.6, vs. 46.4 expected which marks the 7th consecutive month in contraction territory. The release showed that input price rises had increased in Jan. after 7 months of moderating, suggesting that price pressures might be a bit more resilient than expected. Both Services and Manufacturing PMIs came in below 50. In addition, the Richmond Fed’s manufacturing index came in at a post-Covid low of -11 versus expectations at -5. In Europe, the Euro Area Jan. Flash Composite came in at 50.2 vs. expectations at 49.8. Both Services and Manufacturing PMIs surprised on the upside at 50.7 (vs. 50.1 expected) and 48.8 (vs. 48.5 expected) respectively, above the 50-mark for the first time since June. The reading suggested that the European economy has been faring better lately, also supported by the rise in consumer confidence on the previous day. Slower inflation, eased energy prices, and more flexible supply-chain constraints contributed to the euro economic expansion. In France and Germany, composite PMIs were still in contraction territory with respective readings of 49 and 49.7. In Japan, Jan. composite PMI expanded to 50.8 from 49.7 in Dec. although new orders remained in contractionary territory for the third consecutive month, rising from 49.2 to 49.6. Manufacturing PMI stagnated at 48.9.

What to watch

  • Monday: US ISM manuf. index (Apr.)
  • Tuesday: Australia RBA decision (May); Euro area: final PMIs, M3 (Mar.), Bank Lending Survey (Q1), flash HICP (Apr.); US durable goods (Mar.)
  • Wednesday: US FOMC decision (May); US ISM non-manufacturing index (Apr.)
  • Thursday: Norway Norges Bank decision (May); Euro area ECB decision (May); US trade balance (Mar.)
  • Friday: Germany factory orders (Mar.); US: nonfarm payrolls (Apr.)