The Week Ahead in the Markets

We're living through some crazy economic times, and this week is no different. There's a number of events to be aware of this week so that you can stay on top of where we are and where we're going.

Let's go over some of those key events:

First Republic Earnings - Today After Hours

It feels like the banking crisis that started last month is already fully behind us.

But is it really? And if not, what damage do we need to deal with exactly?

For those of you who missed out on the banking crisis, First Republic was the highest profile bank that investors were worried about following the collapse of SVB.

After today's earnings, we should be able to see exactly how much damage the customer withdrawals caused.

For more context, take a look at this WSJ article.

Case-Shiller Index - Tuesday

I personally think the Case-Shiller index is pretty useless; It's only the average of the top 20 cities, and it's also severely lagging behind current data.

Although I don't think it's a productive metric, you'll definitely see a bunch of headlines about it on the day it comes out (there are already fear mongering headlines even before the results come out). Therefore, I decided to include it here.

I believe we'll see a few months of negative YoY housing price growth for a very simple reason: price growth was uncharacteristically large at this time last year.

Even if 2023 followed normal seasonal price action, it would still show negative growth because last year was so crazy.

However, contrary to a lot of people, I expect the national median house price to be positive YoY as we head into the summer.

New Home Sales - Tuesday

New home sales are expected to come in at 630,000. I expect this number to increase steadily as the year progresses.

Why?

With rates this high, existing homeowners with rates in the 2s or 3s have very little incentive to list their property for sale.

However, builders are running a business, and they need to sell the houses they build. They're more willing to offer rate buy downs and other incentives to move their products.

I think it's likely that the share of houses sold that are new constructions will continue to go up as long as rates remain this high. Time will tell!

GDP - Thursday

Q1 GDP is expected to come in at 1.8%, compared to 2.6% from the previous quarter.

I believe this will be a good directional indicator of where things are headed; an exceptionally low GDP print not only shows that the economy is slowing, but will likely impact consumer sentiment as well.

If it comes low, we'll definitely see a lot of scary headlines. On the flip side, that might give the Fed a reason to pause before their final (hopefully) rate hike in May.

Jobless Claims - Thursday

This is a big one.

The reason the Fed has been so flagrant with their rate hikes is that the labor market is still extremely strong.

Jobless claims have remained low; until we see jobless claims closer to 300,000, the Fed still has plenty of room to hike if they need to.

The estimate for jobless claims is around 250k, which is slightly higher than the previous reading of 245k.

Employment Cost Index - Friday

The ECI effectively tells us how wages grew, and how much additional employees are costing employers.

This is important to keep track of since wage growth feeds into higher inflation. If we see huge wage growth, that's an indication that inflation is still running strong.

I believe that this has been steadily coming down though, and the fears of a Wage-Price Spiral have mostly gone away.

While I don't expect any surprises here, it's important to know what the results are. The current estimate is 1% growth in ECI.

PCE - Friday

And last but not least, we have PCE data coming out on Friday.

To be fair, this isn't super important data. After all, we already got the CPI data last week, and PCE should more or less track with it.

It's still significant, though, given that it's the Fed's preferred inflation metric. It'll be interesting to see if there are any deviations between this data and CPI.

As you can see, it looks like it's going to be a busy week in the markets.

Hopefully things move in the right direction so we can stop worrying so much about the Fed's next move!