Just woke up its a busy week

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This week saw the losses of the first week of 2024 erased as the S&P 500 breached and then retreated from its all-time high. The sectors leading the charge early in the year are healthcare and consumer staples, and those bringing up the rear so far are industrials, commodities, and energy; tech is a bit of a score draw. The Russell 2000 index has also fallen in the first weeks of trading; the dollar has risen, if only modestly, and the Vix index is a tad higher. This would all suggest a defensive start to the year.

 At the end of the week, we had a mixed picture of inflation as producer prices came in slightly better than expected, and consumer prices remained sticky. The earnings season started with strong numbers from JP Morgan but a mixed bag from Citi and Bank of America. Jamie Dimon seemed a little less negative than he had been at times in recent years in his outlook comments describing the economy as “resilient”. In general, CEO’s accompanying comments with earnings painted a modestly positive outlook for the US economy. The coming weeks will be when the season really starts, although Monday will be a quiet day as markets in the US are closed for Martin Luther’s Day. As the week progresses, more banks report, including Morgan Stanley and Goldman Sachs.

Geopolitics may dominate sentiment as much as earnings or economics in the coming weeks. Taiwan elected the pro-sovereignty party candidate to lead the country at this weekend’s elections, which added further tension in that region. British and American forces launched airstrikes on Houthi forces for attacks on Red Sea shipping, making headlines over the weekend. The war continues between Russia and Ukraine. Sweden is probably joining NATO in the summer, which may further anger Putin. Investors always worry that increased geopolitical risk could negatively impact risk assets. The two main concerns to the global economy from an increase in geopolitical tensions are the possible impact on oil supply worldwide and the interruption of access to goods. At present, the oil price supplies have not been impacted, and although shipping rates have risen, they do not appear to have done so in a material way so far that indicates shortages.

The week ahead will see the US consumer return to focus with eyes on retail sales and Michigan Consumer confidence; we also get some comments from Fed officials. China will announce Q4 GDP growth amongst a series of other economic reports. The UK will release UK inflation and retail sales reports and a series of employment data. UK inflation is expected to fall again to 3.7%. Stocks are starting the week on a mildly positive note.