20230911 US Macro Strategy Weekly Report(11th-15th September 2023)
2023-09-11 15:26uSMART


James Ooi/ uSMART Market Strategist

Over 13 years of experience in buy-side and sell-side of capital markets

Former Fund Manager of renowned asset management firm
Focus on fundamental analysis and macro-outlook for US & Singapore markets
SGX Academy trainer



US Macro Strategy Weekly Report


This Week’s Market Outlook:

  • We are now 10 days into September, and the S&P 500 has declined by 1.11%.
  • Today marks the beginning of the Fed's pre-rate-decision blackout period, during which members of the FOMC won't make statements to the press.
  • This week's significant economic data includes the release of the Consumer Price Index (CPI) on Wednesday, followed by the Producer Price Index (PPI) and Retail Sales on Thursday. It's possible that stocks will mostly trade sideways until the US CPI data is released.
  • Other than Oracle and Adobe, which are scheduled to release earnings on Monday and Thursday respectively, there are no other important earnings scheduled for this week.
  • We are currently facing growing challenges that prompt us to take a cautious stance in September (Figure 1):
  1. Crude oil prices have surged to their highest levels in 2023, posing a potential threat to global inflation concerns.
  2. The 10-year bond yield has surpassed its 2022 peak, potentially triggering a stock sell-off due to the inverse relationship between the discount rate and present value.
  3. A stronger dollar is diminishing the competitiveness of U.S. exporters' products in foreign markets, which could have a detrimental impact on the earnings of U.S. companies.


Figure 1: US Dollar Index, US Bond Yield and Crude Oil

Source: Tradingview, 10 Sept 2023


  • Generative AI has surged to the peak of inflated expectations in Gartner's 2023 hype cycle, and is projected to reach transformational benefit within two to five years (Figure 2). Although the hype cycle has never served as a guide for buying, selling, or holding specific companies or industries, it does indicate that the AI hype may begin to wane. Perhaps it is time for 'AI companies' to start generating tangible results rather than merely mentioning more 'AI' during earnings calls."


Figure 2: Hype Cycle for AI


Source: Gartner, Jul 2023


  • Risk-off sectors like utilities and consumer staple fell 8.95% and 2.64% respectively year-to-date, while other risk-on or technology related sectors like consumer discretionary, communication and technology still returned more than 30% thus far in 2023.


Figure 3: Monthly performance of the S&P 500

Source: uSMART, Bloomberg, 10 September 2023


  • The equity risk premium now indicates that US stocks appear unattractive (Figure 4).
    • The equity risk premium currently stands at 0.29%, while the S&P 500 is trading at 4,457 points.
    • The S&P 500 reached its lowest point in 2022 in October. In contrast, when the S&P 500 was trading at an average price of 3,719 points in October 2022, the equity risk premium averaged 1.66%.


Figure 4: Equity Risk Premium

Source: uSMART, Bloomberg, 11 Sep 2023


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