Welcome to “The Week Ahead” where we take a moment to provide our thoughts on what we can expect in markets and the economy during the upcoming week.
A few weeks ago, I took my kids to see The Super Mario Bros. Movie. They were really excited to go to the movies since it was the first time we had gone to an actual movie theater in three years. When I looked up the movie to buy tickets, I noticed there was a massive difference between the Rotten Tomatoes rating of 59% and the audience rating of 96%. Since I tend to lean more toward what critics think, my expectations were not too great. As it turned out, the story was… wait, I am not sure there was a story - but it didn’t matter. The kids loved the experience, and I had fun being with them. I was not disappointed with the movie because I went into the theater with low expectations.
To some extent, that is what is going on right now in markets. While GDP and corporate earnings are indeed slowing, the economic backdrop has not been nearly as bad as feared. This recession when it happens, important to note we are still not currently in recession, will be the most widely anticipated recession of all-time. Even the Federal Reserve recently projected a “mild recession starting later this year.” It seems everyone is in the prediction game these days.
Turning to the stock market, the S&P 500 was up nearly 1% last week. Returns were especially robust considering the debacle at First Republic Bank. Risk assets can do well as long as there is no contagion.
This is another big week for earnings reports, which have been mostly better than expected. Thus far, 261 S&P 500 companies (61% of market cap) have reported results. Revenue growth is up 4.9% while earnings have decreased by 2.3%. Both these numbers have exceeded Wall St. expectations – again, not as bad as feared.
The most important thing this week will be the meeting of the Federal Reserve on Tuesday and Wednesday. Chairman Jay Powell will announce the Fed’s decision on continuing to hike rates or pause. The market overwhelmingly believes we will see another 25-basis point hike, but hopefully they will signal they are on hold for the time being.
Data Deck for May 1 – May 5:
|
Date |
Indicator |
Period |
|
May 1 |
S&P U.S. manufacturing PMI |
Apr |
|
May 1 |
ISM manufacturing |
Apr |
|
May 1 |
Construction spending |
Mar |
|
May 2 |
U.S. job openings |
Mar |
|
May 2 |
Factory orders |
Mar |
|
May 3 |
ADP employment |
Apr |
|
May 3 |
S&P U.S. services PMI |
Apr |
|
May 3 |
ISM services |
Arp |
|
May 3 |
Federal Reserve interest-rate statement |
May |
|
May 3 |
Fed Chair Powell press conference |
|
|
May 4 |
U.S. productivity |
Q1 |
|
May 4 |
U.S. trade deficit |
Mar |
|
May 4 |
Initial jobless claims |
Apr 29 |
|
May 4 |
Continuing jobless claims |
Apr 22 |
|
May 5 |
U.S. employment report |
Apr |
|
May 5 |
U.S. unemployment rate |
Apr |
|
May 5 |
U.S. hourly wages |
Apr |
|
May 5 |
Hourly wages year over year |
Apr |
|
May 5 |
Consumer credit |
Mar |