IPI Market Update- January 6th, 2023

Markets started off the new year with a dose of optimism fueled primarily by the economic calendar, Chinese mobility/policy support, and related monetary policy implications. The jobs report on Friday sent equity markets sharply higher and bond yields lower on the back of a friendly mix of robust job creation and moderating wage growth. U.S. equity markets closed up 1.5% for the week while developed international and emerging markets were up 2.7% and 4.3%, respectively. Bond yields fell sharply taking the 10yr UST to 3.55% while the curve steepened as well. Commodities fell nearly 6% thanks to an 8% decline in crude oil.

Market Anecdotes

  • 2022 left the S&P down 18%, due primarily to multiple compression, closing with a P/E multiple of 16.7x, a valuation almost exactly at the 25-year average.
  • A painful look back at 2022 shows the Barclays Aggregate Index down 13%, the worst return on record by a factor of 4x, a significant contributing factor to the third worst outcome for a 60/40 portfolio since 1950.
  • A strong consumer underpins most bullish/constructive views looking into 2023 – a view bolstered by consumer balance sheets, savings, debt service, and the healthy job market.
  • Real personal disposable income grew in the back half of 2022 after declining for five consecutive quarters – a strong potential bullish tailwind for 2023.
  • With ISM Services and Manufacturing Indexes both falling below 50 for November, a reminder of the predictive nature and efficacy warrants consideration.
  • Freight indices and global PMI survey responses on delivery times and input/output prices continue to illustrate healing supply chains and relaxed pricing pressures. Regardless, Fed officials hit the speaking circuit last week and clearly maintained the higher for longer narrative.
  • A look at high yield and bank loan maturities show relatively light refinancing needs over the next two years but a considerably higher level in 2025 and 2026.
  • BCA suggested most Chinese tier-1 cities have passed peak Covid infections with the remaining areas tick higher and an expectation of return to normalcy sometime later this spring (March).

Declines in global trade data of small open economies, (Singapore -14%, Taiwan -23.4%) a bellwether for global trade and manufacturing activity, are flashing caution with China reopening, normalizing consumption patterns, and slowing global growth are all contributing.

Economic Release Highlights

  • The December jobs report came in stronger than consensus with higher job creation (223,000 vs 200,000) and lower headline unemployment (3.5% vs 3.7%). Labor force participation ticked higher from 62.2% to 62.3%.
  • Average hourly earnings growth in December came in below consensus for both MoM (0.3% vs 0.4%) and YoY (4.6% vs 5.0%) readings.
  • The November JOLT survey registered 10.458mm job openings, higher than the consensus spot forecast of 10.1mm and above the high end of estimate range of 10.00mm-10.33mm.
  • The November ISM Manufacturing Index came in at 48.4, a second consecutive decline but slightly higher than consensus forecast of 48.1 and within the estimated range of 47.5 – 49.0.
  • November ISM Services Index surprisingly came in well below consensus estimate (49.6 vs 55.0) and dipped into contraction territory.

November’s J.P. Morgan Global Manufacturing PMI registered 48.6, down slightly from the prior month reading of 48.8.

The Numbers


The information in this report was prepared by Taiber Kosmala & Associates, LLC. Opinions represent TKS’ and IPIS’ opinion as of the date of this report and are for general information purposes only and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally. IPI does not undertake to advise you of any change in its opinions or the information contained in this report. The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor.

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