Fed will be watching jobs data like a hawk

Market Review from Realm Investment Management – week ending 20th January 2023

US stocks sold-off midweek on increasing recession fears but bounced back strongly on Friday. Comments from US Federal Reserve officials that the central bank has not finished with the tightening campaign worried investors – for instance, Fed Vice Chair Lael Brainard commented “policy will need to be sufficiently restrictive for some time“.

Things change day to day though and on Thursday weak economic data indicated that policy is having the desired impact and helped the view that the Fed can slow the pace of further rate hikes. The rally back on Friday was led by tech and growth stocks. Markets are now pricing in a 0.25% rate increase in February.

On the other side of the coin though, and for the longer term focus, US employment data is still indicating that the labour market remains tight (not what the Fed wants to see) evidenced by last week’s jobs report which showed solid growth and lower-than-expected unemployment claims.

Full report:

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