Wall Street Trading Week Preview: Expert Analysis and Predictions for the Markets Ahead

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•  Mar 26 2023
 

stocks on the run

After the Fed increased interest rates by 0.25% last week, the trading week on Wall Street is set to commence tomorrow.

With banks experiencing losses due to the banking crisis triggered by interest rate hikes, investors believe there is a likelihood of a moderated increase. The Federal Reserve anticipates interest rates to be at 5.1% in 2023 and 4.1% by the end of 2024, implying a probable decrease in 2024-2025 to approximately 3.1% before stabilizing at 2.5% - the projected long-term interest rate.

Warnings of a potential breakdown in the banking system due to quick and substantial increases in interest rates have come to fruition. The extent of the crisis is challenging to determine. Further interest rate increases may exacerbate the situation, leading to a catastrophic breakdown and a severe economic crisis.

Important data this week:

On Tuesday, the Conference Board's consumer confidence index and the Case-Shiller housing price index will be published. On Friday, disposable income, private consumption, and PCE inflation will be released, along with Michigan's measure of consumer confidence. The consumer price index will be published in Europe, and China will release its Purchasing Managers' Index (PMI).

Economic data shows positive trend with PMI at year-high

All economic data released last week indicated a positive trend. The Composite Purchasing Managers' Index for March recorded the highest level in the past year, rising by 3.2 points to 53.3. There is a surge in orders, production output, and employment expansion. The PMI index's improvement appears to correspond with the ISM index, which is a crucial recent indicator. The purchasing managers' indices reflect a growth rate of 2%. The real estate sector also experienced progress, with a 14.5% rise in second-hand apartment sales and a 1.1% increase in new apartments. Applications for mortgages increased by 3% last week, and the number of job seekers decreased by one thousand people to 191 thousand. Orders for sustainable building products increased by 0.2% in February, following an increase of 0.8%.

The positive economic data may not accurately depict the banks' crisis and the expected credit conditions' tightening worldwide, equivalent to an interest rate hike. However, Fed members anticipate another 0.25% interest rate increase later this year.

Fed's 2023 Growth Forecast Anticipates Recession Risk

The Fed's growth forecast of 0.4% in 2023 assumes at least two negative growth quarters this year. This is a mathematical outcome, considering the 2.7% growth in Q4 2022 and the projected 3% growth in Q1 2023, according to GDP Now. Almost all Monetary Committee members see a downward risk to the growth forecast, indicating a potential recession. The yield gap of about 1.2% between 3-month and 10-year yields, the highest since the 1970s, is a strong indicator of an impending recession.

stocks on the run

Please note that the article should not be considered as investment advice or marketing, and it does not take into account the personal data and requirements of any individual. It is not a substitute for the reader's own judgment, and it should not be considered as advice or recommendation for buying or selling any securities or financial products.

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