To The Moon

Like to thank Tiger for awarding the weekly top predictions for both SPY and QQQ over the weekend. Let’s rock the market this week again! 😎

Investors started the year wondering if the global economy was in for a hard landing that would force central banks to pivot and start cutting rates, or if a ‘soft landing’ was still achievable. 

Well, so far, there has been no pivot, so how’s that soft landing looking? This week we’re checking in on what’s happened over the last six months, where things stand, and what the second half might bring.

The Economy

In June last year, many economies were expected to slip into a recession by the end of 2022 or early in 2023. By the beginning of this year, those forecasts had been pushed out to later in the year. The US economy has proved to be resilient so far, and some economists now think a recession is avoidable.

US saw a technical recession with two consecutive quarters of GDP contraction early in 2022, BUT it managed to avoid falling into an actual recession. As confusing as that may sound, it was because of factors like a strong labor market, decent wage growth and accelerating industrial production keeping the economy alive.

If we continue to see recessionary pressures linger around for the remainder of 2023, it could be helpful to refer back to unemployment and wage data to ascertain how the economy is really tracking.

While economic growth is slowing, unemployment rates in most countries have remained low, and consumer spending has shown resilience - so far.

Slow & steady

Inflation and Rates

Inflation has fallen significantly in most countries, with falling energy and commodity prices playing a big role. Unfortunately core inflation isn’t falling as quickly (due to inputs like housing and food remaining higher), which means rates may have to stay higher for longer. 

Several countries have now paused on rate hikes, but it looks like the UK and Europe will have to keep raising. Analysts and some investors have repeatedly bet that rates will soon be falling, but recent comments from central bankers (and data in some economies like the UK) suggest there’s a long way to go before we see lower rates. 

Market Performance


While the media is full of stories about a new bull market, under the hood things are less convincing. We’ve already mentioned that most of the S&P500’s recent strength is due to just 15 stocks.

Top 30 performance 

For a different perspective, here’s the year-to-date performance of the stocks in Dow Jones Industrial Average. Of the 30 stocks in the index only 13 are higher than they were at the end of 2022, and only 5 are up more than 10%.

The Week Ahead

This week we get a fresh look at how likely it is that a key driver of the slowdown will sustain — the recent hawkish tilt by central banks. A slew of inflation reports are due this week, including the US reporting on Friday the core reading which the Federal Reserve targets.

Economic news ahead

We also get data from the euro zone, Canada, Australia and elsewhere. The US PCE deflator is expected to remain elevated, while the eurozone core reading is forecast to accelerate. 

The potential is for that hawkish bias to become even more entrenched among policymakers unless the figures show a marked cooling in cost pressures.

Markets already wobbled on recession concerns at the end of last week, and the inflation conundrum could add to pressure for risk assets in a week where the quarter-end dynamics would already argue for equities to see some profit taking actions ahead.

Follow the trend until it's wrong

⚠️ Trading Tips: Wait for the market to provide the direction for the week. Looking at calls above 435.1 and puts below 432.4 on Monday. Stay lean, stay mean, stay green!

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