John Hancock: Weekly Market Recap Week Ended January 20th

Earnings anxiety

Entering the peak of earnings season, analysts have been scaling back their forecasts for results from the first half of 2023. In recent weeks, earnings expectations for this year’s first and second quarters switched from year-over-year growth to declines for companies in the S&P 500, according to FactSet. For the fourth-quarter 2022 results being released in the current earnings season, analysts expected a decline of around 4.6% as of Friday.

Inversion record

By one measure, the inversion of the yield curve for U.S. government debt recorded its biggest gap on record. As of Friday, the yield of the 10-year U.S. Treasury bond was around 3.48% compared with 4.66% for the 3-month bill—a negative spread of 118 basis points. Prior to this year, a negative spread had never been more than 100 points, according to U.S. Federal Reserve data going back to 1982.

Retail setback

The final month of the holiday shopping season didn’t provide a catalyst for the broader U.S. economy, as retail spending in December fell at a worse-than-expected pace of 1.1%. That result slightly lagged November’s 1.0% decline and was the worst monthly result of 2022 on a seasonally adjusted basis.

Equity style reversal

For the second week in a row, a U.S. large-cap growth stock benchmark outperformed its value counterpart by a wide margin, reversing the trend from 2022, when the value equity style dominated. Over the past two weeks, the growth benchmark gained 4.4% while its value counterpart added 0.3%.

Source: https://wmr.jhinvestments.com/