Market Pulse - The week in review - Jan. 12th 2024

THIS WEEK’S RECAP:  

 

December inflation data in the U.S. came in slightly higher than expected with a rise in energy and food prices. Core goods prices continue to fall, influenced by shifts in consumer demand and easing supply chain issues, while core services prices, particularly excluding shelter, rose slightly more than expected. This data, combined with concerns over price pressures emanating from the geopolitical tensions in the Middle East pose a challenge to the timing of pending interest rate cuts.

 

In periods preceding a rate cycle pivot—where the timing and severity of rate cuts is uncertain—market volatility often mirrors the unpredictable nature of incoming data. As the market navigates through these turbulent data currents, it becomes increasingly important for investors to distinguish between short-term noise and long-term economic signals.

 

The health of the U.S. economy is closely tied to the performance of small businesses, which constitute over 40% of the economic activity. December's Small Business Optimism Index reflected modest improvements in key areas such as credit availability, inventory drawdowns and profitability, though new hires were slightly weaker. Overall, this bodes well for the notion of an economy that remains reasonably strong, avoiding any major downturn thus far.

 

China's central bank is signaling a readiness to further ease monetary policy, potentially by reducing the reserve requirement ratio (RRR) to support credit growth and economic recovery. This move, aimed at bolstering lending capacity and managing liquidity risks, reflects ongoing efforts to counteract economic weakness and deflationary pressures, although an immediate RRR cut is not explicitly confirmed.

 

The Democratic Progressive Party (DPP) of Taiwan secured another term in office. Championing the cause of Taiwanese independence, the DPP managed to keep a slight lead in the polls, outperforming the opposition parties that favour closer ties with China. This electoral outcome may escalate tensions between Taiwan and China.

 

ON DECK FOR NEXT WEEK:

 

Canadian data releases pickup this week: Business Outlook Survey results will be seen Monday, followed by an inflation update in the form of CPI on Tuesday and Retail Sales (November) on Friday.

 

In the US, December Retail Sales results will be reported Wednesday amongst various other monthly economic updates.

 

Earnings season is upon us with major US banks starting to report Q4 results.

 

For more information, please visit ci.com.

 

IMPORTANT DISCLAIMERS

 

This document is provided as a general source of information and should not be considered personal, legal, accounting, tax or investment advice, or construed as an endorsement or recommendation of any entity or security discussed. Every effort has been made to ensure that the material contained in this document is accurate at the time of publication. Market conditions may change which may impact the information contained in this document. All charts and illustrations in this document are for illustrative purposes only. They are not intended to predict or project investment results. Individuals should seek the advice of professionals, as appropriate, regarding any particular investment. Investors should consult their professional advisors prior to implementing any changes to their investment strategies. Certain statements contained in this communication are based in whole or in part on information provided by third parties and CI Global Asset Management has taken reasonable steps to ensure their accuracy. Market conditions may change which may impact the information contained in this document. CI Global Asset Management is a registered business name of CI Investments Inc. © CI Investments Inc. 2024. All rights reserved