The start of the fightback?

Stock markets are enjoying some reprieve after a rocky start to the week and investors will be hoping earnings season provides more cause for optimism in the weeks ahead.

The January blues are alive and well and with markets now eyeing up the possibility of four rate hikes this year, we may be approaching peak fear just in time for earnings season. We’ve quickly pivoted from the transitory inflation narrative to aggressive tightening including a combination of accelerated tapering, multiple rate hikes, and impending balance sheet reduction. That’s quite the shift.

I’m not sure the inflation data tomorrow is going to put investors’ minds at ease, with CPI seen hitting a multi-decade high above 7%. A higher reading could spook investors once again just as equity markets appear to be stabilizing.

We saw a strong recovery in the final hours of trading on Wall Street on Monday, which is carrying over into today’s session. But that could prove fragile if price pressures intensify more than expected, although I do wonder just how much more hawkish the markets can realistically be.

Which may make the timing of earnings season all the more welcome. We’ve had the scare of omicron, the relief rally, and now interest rate anxiety. That’s a lot of uncertainty for investors to contend with. Earnings season should be a timely reminder that the economy remains in a strong position despite all of this.

Can bitcoin hold USD 40,000?

We’re seeing a battle emerge in the bitcoin market after it dipped briefly below USD 40,000 on Monday. The cryptocurrency fought back to defend key support before peaking back above USD 42,500. It’s since settled back around USD 41,500, leaving us none the wiser about where the next move will come. Clearly, there’s plenty of support at USD 40,000 but if bitcoin is as sensitive to monetary tightening as it appears, how long can it hold?

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/

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