Market Notes January 2023
U.S. stocks made solid gains in January, with the S&P 500 just closing its best January since 2019, largely due to inflation data slowing for the sixth straight month in December. The overall consumer price index (CPI) rose from 7.1% to 6.5%, mainly due to moderating energy and food costs. In combination with stronger-than-expected GDP growth of 2.9% (seasonally adjusted annual rate), inflation data led investors to position themselves on slower future rate hikes by the Federal Reserve.
The beginning of February will be punctuated by the publication of results with the major technology groups Apple, Amazon, Alphabet and Meta Platforms.
In Europe, rising inflation and rising key interest rates are hurting activity.
The strong messages sent by the European Central Bank, through its president, Christine Lagarde, have indeed troubled international investors, who had hoped for a faster easing of monetary policies conducted by central banks.
Interviewed at the World Economic Forum in Davos, Christine Lagarde showed her determination to stop the inflationary spiral: "We will stay the course until we have moved into restrictive territory long enough to be able to bring inflation down to 2% in a timely manner."
Bitcoin has declined by more than 60% in 2022. However, in January, Bitcoin recovered well, rising 39% in January.
Ethereum has successfully created a shadow fork (understand test chain evolving in parallel with the main chain) to provide a test environment before an update from Shanghai. During this latest fork, the developers focused on creating a test environment for ETH removals from the ETH 2.0 staking program. A few minor issues were reported during testing. This fork brings us closer to Shanghai's highly anticipated upgrade of the Ethereum mainnet, scheduled for March 2023.
Lending Platform AAVE deploys the V3 protocol on Ethereum. In the V3 protocol, AAVE includes several features, such as high efficiency mode, isolation mode and gas optimization algorithm that will reduce gas costs by 20-25%. Besides Ethereum, AAVE V3 has also been deployed on Avalanche, Arbitrum, Optimism and Polygon. Amazon has announced the deployment of Blockchain services, currently, the initiative is still in the development phase, but the deadline for the launch is set for April. One of the use cases will allow Amazon users to play blockchain-based games and claim NFTs for free. Amazon CEO Andy Jassy said he expects the NFT marketplace to develop further and Amazon may add crypto payments.
Investors firmly believe that the performance of stocks in the first month of the year predicts performance for the rest of the year. That may be the case, but the pace of the recovery has left some investors skeptical about its sustainability.
In conclusion, if markets call for a cautious approach given uncertainties, particularly in corporate earnings, we believe 2023 will offer attractive entry points for high-quality assets.