The Most Important Week of 2023

Every Friday we host a live 1:1 discussion at 12pm EST. 

This gives YOU the opportunity to ask US any questions you have on the markets, the economy, crypto, and more!

Here are the 4 key things we went over: 

• How the Fed will react to inflation finally cooling off

• Why Tesla's earning call caused the stock to skyrocket

• Why Google is at risk of getting broken up

• Where inflation is already showing real signs of cracking

And if you're too busy to listen to the entire recording, below we included a compact summary of what went down.

To get all the juicy details, just listen to the entire recording. And now, onto the summary.

Overview:

A lot of the data we got this week was really encouraging. GDP came back surging 2.9% for the last quarter -- while core PCE inflation dropped to 4.4% year-over-year. 

But that's really not enough for the market.

Remember: Last month Jerome Powell tanked the market by himself when he projected that the Fed will keep raising rates for the entire year.

It doesn't matter if the Fed keeps turning down the amount rate increases every month -- another whole year of making everything slower could absolutely grind the economy to a halt. 

That's why the only truly important news coming out of this week will be the Fed press conference on February 1st.

It's not even about the number of basis points JPowell is raising rates by -- it's about his comments re: when rates will start to fall.

We're aware this kind of commentary is extremely boring as we've been talking about inflation for over a year now, but this is probably one of the most crucial inflection points we'll see all year.

There's a lot more to cover here, so let's dive through the details 👇

Everything Depends on the Fed:

After a really encouraging week of economic data, coupled with a solid CPI from way earlier in the month, the market is really eager to see Jerome Powell announce a reduction in the Fed rate this week.

We're hoping for 25 basis point increase and for a road map from the Fed on when we can anticipate the first time the central bank reduces interest rates. 

Our whole economy is functioning on the flow of debt right now. And for over a year, that debt has become more and more expensive.

We've watched our biggest companies truly struggle under the weight of more expensive debt and the compounding issue that these really aggressive rate rises made the dollar ludicrously strong compared to every other world currency. 

The good news is that the world is finally catching up to the Fed. The dollar has been weakening faster and faster since peaking in Q3 2022.  So half of this issue is getting easier and easier for companies to bear. 

But, the major effects of these rate rises only come 6-9 months down the line. That's why we only saw this truly biblical wave of tech layoffs hit in January instead of July.

There may be more pain as more and more companies are forced to chip away at their margins to survive this brutal demand destruction. 

That's why Jerome Powell's comments are much more important than the actual rate increase on Wednesday.

If the market can price in any scenario where we get relief from this in 2023 -- that will make it easier to stomach the huge destruction in margins and revenues we'll see coming in the rest of this current earnings season and the next (brutal) one that starts rolling out in March. 

You'll probably see a mild selloff until that happens, and a lot of volatility after depending on what Powell's remarks are.

For now, this is also going to be a really noisy week because we're entering into the real meat of earnings season.

Earnings are Really Encouraging:

And last week's earnings were solid by the way.

Tesla got right back to its ludicrously fast expansion, and Microsoft is managing to hit equilibrium.

But those calls were basically just appetizers for the main event of earnings this week. The bulk of big tech reports after the FOMC meeting, starting off with Meta.

All we really want to see is our biggest growth companies surviving the really difficult macro environment, and frankly, we'd be really excited if Mark Zuckerberg slowed down the insane firehose of cash he's flooding his metaverse play with. 

Pharma is also going to be a big player this week -- which is going to be a central inflection point for our analysis moving forward.

There's a growing concern on the Moby analysis team that pharma had outsized growth last year due to capital flight from tech.

All that means is that Pharma benefited more than it should have as the market started fleeing less inflation-friendly plays.

We want to make sure that this pharma boom has legs that will carry it even into the next bull run when it transpires.

If Eli Lilly and Merck keep their solid run of revenue growth going and the market responds by buying more, we'll stay confident about pharma going into the rest of 2023.

But we're watching closely to see if any factors make the market get too cautious about pharma growth. 

And that only really is the tip of the iceberg. We're also getting key earnings from major financial, industrial, and energy players. This week is going to be a major pulse-check for the broader economy. 

Wrapping this Up:

Welcome to a huge week in the market, folks.

All of the positive indicators we've gotten in the last month can be easily wiped out with a little bit of volatility from energy and food prices, but if enough companies demonstrate they have the strength to power through this market -- then the broader economy has a decent chance of shifting to a more moderate bullish sentiment after half a year of bear despair. 

That's why we're calling this week the inflection point.

It can easily tip back to bad vibes, but this could also be the shaky start to half a year of recovery. 

Whatever happens, we'll keep you posted as quickly as possible. Gear up for a wild ride, y'all!