Gan Ltd., Boot Barn post big gains in past week

1 The U.S. economy: Strong (at first glance), but losing steam. The latest GDP data showed that the U.S. economy grew at a +2.9% real (inflation-adjusted) pace through the final quarter of 2022. The headline number implies strength, but digging into the details reveals less favorable dynamics. Three components caught our attention: 1) inventories, which continued to build as goods demand weakened, contributing about half of the growth reported; 2) consumption, which came in solid but slower than expected; and 3) capex which appears to be cooling despite firm spending on tech.

2. The bond market: A record start. Bloomberg’s Global Bond Index has surged over +3% in 2023, the best start to a year in over two decades. The prospect of the end of the global tightening cycle is prompting borrowers to seek opportunities to raise financing and making investors ready to take on debt. Global issuance of investment- and speculative-grade government and corporate bonds across currencies reached $600 billion year-to-date (through January 18), the biggest tally for the period.

3. European equities: First inflows in nearly a year. While the sum of inflows was only $200 million three weeks ago, it’s a significant turnaround from near-record outflows just one year ago. The catalyst: The worst-case economic scenario for the region seems to have faded over the past few months. A warmer-than-feared winter has left natural gas supplies near ~75% of storage capacity, relative to the ~55% typically seen at this time of the season. Looking ahead, investors may look at the still wide valuation discounts, brighter economic growth prospects and a peaking dollar

4. Corporate layoffs: The list is growing, yet the stocks are among the best performers this year. The latest tally of layoffs reveal that the companies are persistently contained within tech, finance and real estate—the most interest-rate-sensitive sectors of the economy. Notably, so far this year, these sectors in the S&P 500 are also at the top of the returns leader board. Broad weakness across industries has yet to reveal itself, yet these dynamics are keeping the sought-after soft-landing window open.

5. Housing: Finding a footing. Following a record string of declines over the past two years, sales of new homes in the United States rose for a third consecutive month in December. Housing starts for single-family homes also saw their first gain in four months. The 1% fall in mortgage rates catalyzed the largest weekly jump in mortgage applications since 2020. While it’s hard to tell a story or predict a path forward from earlydays datapoints, signs are pointing toward a sense of stability in what has been the most beaten-up segment of the economy over the past year.

Source: J.P. Morgan Private Bank, January 2023. “5 facts for investors to consider” , By Olivia Schwern, Global Investment Strategist, J.P. Morgan Private Bank.