Skip navigation Scroll to top
Scroll to top

LGT Navigator: Bleak economic outlook in the US fuels hopes for more moderate Fed policy

January 24, 2023

A gloomy outlook for the US economy and statements by top Fed officials fuelled hopes for a more moderate Fed policy, which in turn boosted stock prices on Wall Street. ECB chief Lagarde, on the other hand, once again underlined the restrictive orientation of her institution's monetary policy and prepared the markets for further interest rate hikes in the run-up to the upcoming interest rate decision next week. No impulses are expected from Asia this week due to the Chinese New Year.

Bleak economic outlook in the US fuels hopes for more moderate Fed policy
Shutterstock

The stock indices on the New York Stock Exchange started the new week with gains. The Dow Jones Industrial rose to 33,629.56 points (+0.76%) and the S&P 500 gained 1.19% to 4,019.81 points. On the Nasdaq, the indices gained about 2.2%, reaching a four-week high. Sobering economic data from the US and dovish statements from the top of the Federal Reserve fuelled hopes for a more moderate monetary policy stance. Fed Director Christopher Waller said that US interest rate policy could now be "sufficiently restrictive". The US leading indicator fell by 1.0% in December compared to the previous month, signalling a deterioration in the economic outlook for the US economy for the tenth month in a row. The market research institute Conference Board commented that the renewed decline was a further signal of an imminent recession in the US economy.

The focus now shifts to further quarterly figures of listed companies, such as Logitech, Johnson & Johnson and Visa (today); Givaudan, Microsoft and Tesla (Wednesday); SAP, Visa and Intel (Thursday); or American Express and Chevron (Friday).

In Asia, many stock exchanges remain closed for the Chinese New Year. In Tokyo, the 225-stock Nikkei index was trading about 1.5% higher on Tuesday and the Japanese yen was up about 0.4% against the US dollar, trading above 130 for the second day in a row.

Interest rates still have to rise significantly and steadily, according to ECB chief Lagarde

Christine Lagarde, President of the European Central Bank (ECB), once again emphasised that the ECB's monetary policy must remain restrictive to lower inflation. Key interest rates would still have to rise significantly and steadily to reach a sufficiently restrictive level and ensure a return of inflation to the target set by the central bank, Lagarde affirmed. The ECB's next monetary policy meeting is next week, on February 2.

Ahead of the ECB rate decision, the euro hit its highest level since April 2022, trading above 1.09 against the US dollar.

Improved consumer sentiment in the euro area

At the end of last year, consumer sentiment in the euro countries brightened for the fourth month in a row. The indicator calculated by the EU Commission rose by 1.1 points compared to the previous month to minus 20.9 points, reaching the highest level since February 2022. Nevertheless, the sentiment barometer remains clearly below the long-term average.

Economic situation in Germany has improved, according to the Bundesbank

According to the latest monthly report of the German Bundesbank, the latest economic data indicate an overall improvement in the economic situation compared to the last assessment in December. Although the German economy continues to be affected by high inflation and uncertainties surrounding the war in Ukraine, the situation on energy markets and supply bottlenecks in industry have eased noticeably compared to the summer.

Economic Indicators January 24

CET Country Indicator Last period
08:00 GE GfK Consumer Climate (February) -37.8
08:45 FR Economic Indicator (January) 101.0
09:15 FR PMI Composite (January) 49.1
09:30 GE PMI Composite (January) 49.0
10:00 EZ PMI Composite (January) 49.3
10:30 UK PMI Composite (January) 49.0
10:45 EZ ECB President Lagarde speaks
15:45 US PMI Composite (January) 45.0

Earnings Calender January 24

Country Company Period
SZ Logitech Q3
US Johnson & Johnson Q4
US Visa Q4
US Verizon Q4
US General Electric Q4

 

LGT helps you make informed investment decisions

All about global economic and market trends at a glance

Subscribe to LGT's research newsletters

You can also follow us on Facebook or LinkedIn – or visit MAG/NET and discover interesting background articles. If you have questions, a consultant from the bank will be happy to help you.

 

Imprint
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

 

Risk Disclosure (Disclaimer)
This publication is an advertising material / marketing communication. This publication is intended only for your information purposes. It is not intended as an offer, solicitation of an offer, or public advertisement or recommendation to buy or sell any investment or other specific product. The publication addresses solely the recipient and may not be multiplied or published to third parties in electronic or any other form. The content of this publication has been developed by the staff of LGT and is based on sources of information we consider to be reliable. However, we cannot provide any confirmation or guarantee as to its correctness, completeness and up-to-date nature. The circumstances and principles to which the information contained in this publication relates may change at any time. Once published information is therefore not to be interpreted in a manner implying that since its publication no changes have taken place or that the information is still up to date. The information in this publication does not constitute an aid for decision-making in relation to financial, legal, tax or other matters of consultation, nor should any investment decisions or other decisions be made solely on the basis of this information. Advice from a qualified expert is recommended. Investors should be aware of the fact that the value of investments can decrease as well as increase. Therefore, a positive performance in the past is no reliable indicator of a positive performance in the future. The risk of exchange rate and foreign currency losses due to an unfavorable exchange rate development for the investor cannot be excluded. There is a risk that investors will not receive back the full amount they originally invested. Forecasts are not a reliable indicator of future performance. In the case of simulations the figures refer to simulated past performance and that past performance is not a reliable indicator of future performance.

The commissions and costs charged on the issue and redemption of units are charged individually to the investor and are therefore not reflected in the performance shown. We disclaim, without limitation, all liability for any losses or damages of any kind, whether direct, indirect or consequential nature that may be incurred through the use of this publication. This publication is not intended for persons subject to a legislation that prohibits its distribution or makes its distribution contingent upon an approval. Persons in whose possession this publication comes, as well as potential investors, must inform themselves in their home country, country of residence or country of domicile about the legal requirements and any tax consequences, foreign currency restrictions or controls and other aspects relevant to the decision to tender, acquire, hold, exchange, redeem or otherwise act in respect of such investments, obtain appropriate advice and comply with any restrictions. In line with internal guidelines, persons responsible for compiling this publication are free to buy, hold and sell the securities referred to in this publication. For any financial instruments mentioned, we will be happy to provide you with additional documents at any time and free of charge, such as a key information document pursuant to Art. 58 et seq. of the Financial Services Act, a prospectus pursuant to Art. 35 et seq. of the Financial Services Act or an equivalent foreign product information sheet, e.g. a basic information sheet pursuant to Regulation EU 1286/2014 for packaged investment products for retail investors and insurance investment products (PRIIPS KID).