Skip to main content
Weekly Outlook

Weekly Outlook 09 January 2023 – 15 January 2023

Weekly Commentary: 09 January 2023 – 15 January 2023

Markets were up slightly the past week except for the Hang Seng Index (6.56%), continuing to rally on expectations of China’s re-opening. 223,000 jobs were added in the month of 2022, exceeding estimates of 205,000, according to the non-farm payroll released by the Labour Department last Friday. Average hourly earnings were up 4.6% in December from the previous year, the narrowest increase since mid-2021, and down from a March peak of 5.6%. 2022 was the second-best year of job creation after 2021, when the labour market rebounded from Covid-19 shutdowns and added 6.7 million jobs. In spite of all these positives, last year’s gain was concentrated in the first seven months of the year as a wave of tech and finance-industry layoffs suggests that the labour market is cooling. That would suggest that 2023 could bring slower hiring or outright job declines as the overall economy slows or tips into recession. Initial unemployment insurance claims data averaged about 215,000 through the end of 2022, a slightly lower figure than 2019’s average. A new subvariant of COVID-19 has also derailed investors’ sentiments as it is the most transmissible variant yet. XBB and XBB1.5 were estimated to account for 44.1% of COVID-19 cases in the United States in the week ending 31st December.

In light of this, stock returns were slightly higher over the week as observed across the following 3 indices, with the Dow Jones Industrial Average (+1.50%), S&P 500 Index (1.47%) marginally outperforming the NASDAQ Composite Index (+1.01%). Other key market indices that generated positive returns consist of the MSCI AC ASEAN (+0.44%) and Hang Seng Index (+6.12%). Most of the eleven S&P 500 sectors saw returns in the positive territory, with the exception of Healthcare (-0.17%) and Energy (-0.24%). Main outperformers for the week were from subsectors such as Materials (+3.45%), Communication Services (+3.75%) and Financials (+3.42%). For 2022 as a whole, index returns were negative for the Dow Jones Industrial Average (-8.78%), S&P 500 (-19.44%) and the NASDAQ Composite (-33.10%).

The yield-curve remains inverted as the 10Y-2Y US Treasury spread widened further by 6 bps to -0.69%, driven by U.S 2-year and 10-year Treasury yields dipping 12 bps to 4.25% and 18 bps to 3.56% respectively. Market sentiment also became more risk-off as the U.S. High Yield (HY) – Investment Grade (IG) credit spread widened by 22bps to 3.05% while the CBOE Volatility Index (VIX) has climbed lower by 177bps to 21.13%.

This coming, The Labour Department will release its December consumer-price index, a closely watched measure of what consumers pay for goods and services. Consumer inflation may have slowed in recent months, but still, remains historically high. Federal Reserve governor Lisa Cook has also commented that inflation has to fall much more to reach acceptable levels. In Singapore, both the CPI and MAS core inflation have slowed by 0.8 pp and 0.2 pp MoM to 6.7% and 5.10% YoY respectively for the same month. Furthermore, 3Q22 earnings updates have mostly been positive and have lifted market sentiment in the past few weeks. With all of the S&P 500 companies having reported their results for 3Q22, around 71% and 70% of the companies have since reported positive revenue and earnings surprise respectively.

Most of the global REIT markets delivered positive weekly returns with the yield spreads remaining positive. Closer to home, the iEdge S-REIT Index (-0.04%) and its subsectors mostly generated negative weekly returns with Business Trust (+1.77%), Specialized (Pureplay DCs) (+2.65%) and Industrial (+0.39%) the only ones that generative positive returns. On the other hand, Diversified (-0.09%), Healthcare (-0.22%), Hospitality (-0.91%), and Office (-0.96%) were the subsectors that led to the decline during the period. REITs generally have been affected by decreasing yield spread as interest rates surged and investors price in the possibility of reduced distributions stemming from higher financing costs. However, we do expect inflows to return to the sector given the existing attractive valuations on offer and resilience offered by the REIT asset class in light of the waning global growth outlook.

Important Information

This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.

An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.

Investments are subject to investment risks including the possible loss of the principal amount invested, and are not obligations of, deposits in, guaranteed or insured by PCM or any of its subsidiaries, associates, affiliates or PDs. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved. Any use of financial derivative instruments will be for hedging and/or for efficient portfolio management. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products. The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <> for more information in relation to the dividend distributions.

The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.

The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. This advertisement has not been reviewed by the Monetary Authority of Singapore.

Leave a Reply