2024-01-21 15:40:00
The market was admittedly surprised by the consumer price index for December, which indicated an increase in inflation to 3.4% compared to 3.1% in November, but it seems that the markets have recovered quite a bit and last week they closed with gains. Alongside this, several published indices continue to give reasons for optimism about the American market.
Private consumption continues to surprise positively
Yonatan Katz from Lidar points to the index as the main engine of growth in the USA which continues to show strength. In December, retail sales increased by 0.6% (the expectation was 0.4%) and the basic cut (group control, without fuels and several other components) increased by 0.8% after 0.5 % in November. In the third quarter, private consumption increased by 3.1% (realized on an annual basis), and probably increased by 2.4% in the fourth quarter (we will know on Thursday).
“Other data also point to the strength of the American consumer. The number of new jobseekers decreased by 16,000 people to 187,000, the lowest level since September 2022,” adds Katz “Conclusion: private consumption (which makes up 68% of GDP) continues to be a leading engine for growth. This positive real environment does not support a rapid interest rate cut by the Fed as the markets are pricing in.”
Consumer confidence index
Yoni Penning, the chief strategist of Mizrahi Tefahotpoints to the consumer confidence index as an illustration of the positive sentiment in the US: the current monthly increase in the index is currently the largest since December 2005, and the current level of the index is the highest since July 2021, close to the beginning of the inflation increases, and half a year before the beginning of the Fed’s interest rate increases, he notes Fanning.
“The main improvement in the index was due to an increase in the respondents’ expectations for economic activity in the future, that is, in one year and in three years,” he adds Fanning. “To this can be added a decrease in inflation expectations for one year (3.1% to 2.9%) and five years (2.9% to 2.8%). The announcement also stated that the improvement in inflation expectations was supported by the perception of easing price pressures and purchasing conditions. We estimate that beyond the continuous improvement on the supply side Globally, there is an effect here of the drop in yields in recent months, which translates into more favorable consumer credit.”
Fanning He also pointed to the retail sales data which surprised with a considerable monthly increase of 0.6%: “This month is of course an important indication of the holiday sales season, and in that sense, there is probably proof of positive consumer sentiment here, despite the sequence of interest rate increases, and the moderation in the tightening of the employment market. The increase of wages (nominal and real)” notes Fanning. “The industry segmentation also indicated a positive consumer sentiment, with an increase in sales of marketing chains, clothing and automobiles. As above, there was a slight decrease in sales at gas stations, in light of the lower gas prices, during the month.”
Alex Zbzinski, Chief Economist at Meitav Investment House, indicates that the market realizes that there will probably be no quick interest rate cuts by the Fed: “Against the background of the good economic data and the continued sending of “hawkish” messages by the Fed’s spokesmen, last week there was a fairly strong increase in bond yields in the US while An increase in interest rate expectations. The market now embodies about 5 interest rate cuts in 2024, when a week ago the expectations were more than 6. The chance of the interest rate cut in March embodied in the contracts fell below 50%. In our opinion, when the market’s expectations reach 4 interest rate cuts, the long-term yields in the US will once again become attractive for investment.”
The report season has opened
The report season for the fourth quarter, as well as the annual reports for 2023, opened when a number of companies have already reported, including some of the largest banks in the US, but also other companies such as chip giant TSMC.
David Benjaminov, research analyst at Global X, indicates that the report season may indicate a slowdown in the growth rate of earnings per share: “With the opening of the earnings report season for the fourth quarter of 2023, the market expectation is that we will see a moderation in the growth rate of earnings-per-share (EPS), to a level of 3% compared to the fourth quarter of 2022 , while the annual growth rate in the third quarter of 2023 was 4%,” notes Benjamin “This slowdown is despite the fact that the 4th quarter of 2022 was relatively weak. The annual increase in sales is expected to be 3%.”
The sentiment regarding the chip industry is particularly positive, especially in light of the fact that STSMC stated that it expects growth of between 20%-25% during the year 2024. “Chip stocks have recently experienced a positive tailwind, and this against the background of the sector’s strong performance in 2023 thanks to the momentum The AI and demand for advanced chips for a variety of applications,” adds Benjamin “Despite the high valuations, which may produce volatility in 2024, we are optimistic about shares such as Nvidia, Broadcom BROADCOM INC +5.88% Close:0 Open:1,157.31 High:1,217 Low:1,156 Turnover:– page quote news graphs company profile recommendations additional articles On the subject: , AMD ADVANCED MICRO DEVICES +7.11% Close:0 Open:166.04 High:174.25 Low:162.2 Cycle:– Page Quote News Graphs Company profile Recommendations Additional articles on the subject: , Micron MICRON TECHNOLOGY +3.17% Close:0 Open:86.01 High: 87.79 Low: 85.62 Cycle:– Page Quote News Graphs Company Profile Recommendations Additional articles on the subject: and Intel INTEL CORPORATION +3.02% Close:0 Open: 46.95 High: 48.76 Low: 46.45 Cycle:– Page Quote News Graphs Company Profile Recommendations Additional articles on the subject: , among other things against the background of the incentives of the chip law. However, these companies will have to justify their high valuations with strong results.”
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