Stocks are lower on Tuesday as US markets reopen after Christmas. At the same time, concerns over the well-entrenched 2022 wall of worry list, including Fed policy endgame, inflation, growth, and the prospect of a recession in 2023, dominate investors’ psyches during the final trading days of the year.

Investors hoping for a year-end rally are likely disappointed as holiday cheer seems in short supply.

Traditionally, the last week of the year is one of the lightest regarding scheduled information.  Almost everyone is becoming one with their couch, and liquidity is in short supply.

But, like so much of the post-pandemic normal, this week is shaping up to be anything but dull. While the scheduled data docket remains empty, unscheduled headlines from China, TSLA weighed on US equities Tuesday, with investors assuming a more defensive stance.


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Yields on 10-year Treasuries rose to 3.85%, and ‘growth’ sectors like Tech, Communication Services, and Consumer Discretionary are getting dented. While some of what we are seeing could result from seasonally low liquidity, there are a few things to consider if you plan on making it to your screens.

TSLA is the worst-performing stock in the S&P 500 on Tuesday as new reports that it is extending a scheduled shutdown of a factory in Shanghai amidst rising COVID cases, in addition to concerns about softening demand for its vehicles, weigh on the stock.

TSLA’s decision to extend the shutdown also comes on the heels of China’s move to significantly relax its COVID policy, a critical step to fully reopening the economy while also putting pressure on its medical system.

And while a full China reopening could provide a much-needed and timely boost to the global economy, it may come with unwelcome ambiguous strings attached. The good news is that inflation subsides as China reprises its role as a supplier of low-cost goods globally and supply chain bottlenecks ease. Still, the bad news is as growth accelerates through Q1, China’s insatiable demand for raw materials and all things energy will push up prices of those commodities, much of to the consternation of the Fed and ECB. Indeed, reopening is rekindling some inflationary spirits.

Taking a step back, inflation, growth, the Fed, and the risk of a recession all remain in the background. Investors still seem skeptical of the sustainability of the recent moderation in inflation while staying focused on the Fed reaction function and whether that policy response spirals the US economy into a downturn.


China’s reopening is CNY positive, where the improved growth expectations in 2023 might outweigh unfavourable factors such as domestic inflation and a deterioration in goods and services trade balances.

Traders are turning more bullish on the Thai Baht as Thailand may benefit the most from the international tourism channel if China removes visa restrictions and outbound travel gradually normalizes.


As we head into the first month of 2023 in an ambivalent environment where supply tightness and recession fears pull traders in different directions, I suspect the market’s intense rollercoaster ride should continue in 2023. But it is amazing, given the wild swings this year, that oil prices have basically come full circle, and  we are back to Brent trading mid $ 80s, almost precisely where we started in 2022

China’s High-frequency mobility data in December and Emerging Industries PMI (EPMI) pointed to weaker growth momentum during the frontloaded “exit wave” on the back of surging infections. They may ultimately provide a reality check to the speculative reopening froth-consuming prompt oil markets.

Although the NHC stopped releasing Covid data, oil traders are using the experience from Hong Kong and Taiwan, suggesting daily new cases may peak sometime in mid to late January in mainland China, which should be good news for oil markets. But there remain significant uncertainties regarding how households and multi-national corporations react to the large “exit wave” of COVID infections in the near term and how they behave in the post-COVID regime later next year.

Published by Stephen Innes, Managing Partner, SPI ASSET MANAGEMENT