Key question – is strong US jobs data good or bad for the market?

Key question – is strong US jobs data good or bad for the market?

Market Review from Realm Investment Management – week ending 10th February 2023

After rallying from their lows three months ago, Bonds turned lower last week following the stronger-than-expected US jobs report released 3rd February. The US 10yr Treasury yield was up strongly, finishing on Friday above 3.7%. Key US inflation data is being released tomorrow (Tuesday).

The US jobs market remains surprisingly strong and investors have to decide if that’s good or bad news for risk assets. Not an easy call – strong economic data might prompt the Federal Reserve to tighten monetary policy further. Fed Chairman Jay Powell said on Tuesday that the “disinflationary process” had begun, but the Fed was likely to continue raising interest rates. Minneapolis Fed President Neel Kashkari was also reported as saying, “most of my colleagues believe rates will rise above 5%”. The market is now expecting two more interest rate increases from the Fed this year rather than just one.

The UK narrowly avoided a recession last year according to data published by the the Office for National Statistics on Friday. GDP was unchanged in the fourth quarter of last year – a negative figure would have indicated two quarters of contraction and indicated a technical recession. The yield on the UK’s 10-year Gilt ended the week above 3.3% and has printed above 3.44% today (Monday), its highest level since 17th January.

Artificial Intelligence (AI) is suddenly the hot topic and reportedly Microsft will be adding its ChatGPT app to Office apps as well as Bing and Edge. Shares in Google’s parent Alphabet fell heavily last week following a first public demonstration of its own AI-based chatbot went very wrong after the app gave an incorrect answer to a question.

UK Market Chart 10th February 2023

US Market Chart 10th February 2023

US Risk Barometer 10th February 2023

Europe Risk Barometer 10th February 2023

Disclaimer: ‘Where the business has expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. The information contained within this communication is believed to be reliable but Realm Investment Management Limited does not warrant its completeness or accuracy.

This communication is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendation.

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