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In the Know – January 24, 2023

POSTED ON JANUARY 24, 2023    

Overseas news

US equities started the week on a good note, with gains led by tech stocks on optimism for earnings season. Positive sentiment for taking on risk was fueled by markets’ expectation that the Federal Reserve will slow down on rate hikes, starting with a smaller 0.25% increase on February 1.

 

Lower rate hikes mean that the cost of borrowing money will not go up as sharply as it did when the US central bank began its tightening cycle. This may allow companies to take out loans for expansion, helping their business grow and benefitting their shareholders.

 

Individuals may also take this opportunity to borrow and spend, which would be good for many organizations too.

 

Still in US stocks, the reporting season for the fourth quarter of 2022 has shifted into overdrive, with 57 of the companies in the S&P 500 having posted results. Of those, 63% have delivered better-than-expected earnings, according to Refinitiv.

 

Aside from their economic effect, the unexpectedly good earnings of such companies can boost the confidence of investors who use this performance data to make their decisions.

 

Local developments

Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla said inflation is expected to be below 4% by the third quarter of this year and below 2% by early 2024 due to high base effects. Due to worse supply shocks, he expects above-target inflation to last around 16-18 months before normalizing.

 

These expectations are hints at how the economy might do in the coming months. However, developments may have a big impact on the actual performance, and so these forecasts may be revised in the future.

 

According to National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan, over 3,600 infrastructure projects worth a total of $372 billion are in the pipeline and set to be implemented through 2028.

 

Such projects can have a substantial impact on the local and national economy, given their potential for creating more direct and indirect opportunities for job creation, spending, and trade.

 

The news is positive, but it might be a good idea to still avoid big investing decisions until you’re confident that markets will start climbing.

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