Global Risk Monitor: Week in Review – Jan 23

Market Overview - The global financial landscape is experiencing significant volatility and a rotation across asset classes, particularly towards small-cap stocks as investors move away from high-valuation mega-cap technology stocks [1] - Technology stocks have underperformed in January, with concerns over AI-related valuations and rising interest rates contributing to this trend [1] - The commodities market has seen a remarkable surge, with silver prices increasing by over 44% in January and natural gas prices spiking more than 70% in the past week due to a severe cold spell [1] Regional Economic Insights - Asian equities, especially in Korea, have shown strong performance, with the Korean market up 18% in January [2] - The U.S. dollar has declined sharply, with the DXY index dropping 1.80% over the week, impacting market sentiment [2] - U.S. GDP growth has been revised higher to 4.4%, but persistent inflation and geopolitical tensions continue to affect market dynamics [2] Inflation and Economic Indicators - The divergence between CPI and PPI indicates ongoing inflationary pressures, with the November core PCE price index rising 0.2% monthly and 2.8% annually, remaining above the Fed's 2% target [6] - Consumer sentiment is improving monthly but remains 20% lower year-over-year due to high prices [6] Precious Metals and Commodities - Gold prices surged by 8% this week, while silver saw a 15% weekly gain, driven by a weakened U.S. dollar [6] - The demand for precious metals is rising as a hedge against inflation and dollar depreciation, although the rapid increase in silver prices suggests potential volatility [6] - Natural gas prices have experienced extreme volatility, driven by weather conditions, with a forecast for continued monitoring of inventory reports [6][7] Technology Sector Trends - The technology sector, particularly software stocks, is under pressure due to concerns over AI valuations and a broader rotation away from mega-cap tech stocks [6] - Major tech earnings from companies like Microsoft, Apple, and Tesla are expected to influence investor sentiment significantly [8] Market Outlook - The upcoming week is anticipated to be marked by higher volatility as investors navigate a dense schedule of high-impact earnings and a pivotal Federal Reserve meeting [8] - The EIA Crude Oil and Natural Gas Inventories reports will be critical for assessing supply constraints following recent price spikes [8]