What to watch in the week ahead 6/5

Key takeaways

  • Next week’s economic calendar highlights are April consumer credit data, to be released on Tuesday, weekly mortgage applications, which will be published on Wednesday, and various measures of inflation data coming out on Friday.

  • The global macroeconomic backdrop remains challenging, with a potential eurozone recession, geopolitical risk and China’s economic woes at the forefront. 

  • Last week, Yieldstreet offered income and growth notes, structured products – based on equity performance – that allow investors to benefit from some of the underlying equity’s upside, while limiting potential downside.

Weekly releases

Consumer credit data, which will be published next Tuesday, is likely to give investors insights on future consumer spending trends. In the past few weeks, while consumption numbers remained somewhat positive, there has been increasing evidence that US consumers are beginning to tap into their savings, and increasing their credit card debt. This, if confirmed, may point to a consumption slowdown going forward. 

Mortgage applications, to be released on Wednesday by the Mortgage Bankers Association (MBA), will give investors a snapshot on the real estate market. Our data – from a home builder survey conducted by a consultant – points to a slowdown, as only 39% of builders raised prices month-over-month in May – the lowest number since spring 2020 – compared to 92% in February 2022. May cancellations also rose to 9%, up from 8% in April, still at low levels but trending higher, and will likely get worse in coming months. 

Finally, Consumer Price Index (CPI) data, to be released on Friday, is poised to offer clues on the direction of inflation. The latest Personal Consumption Expenditures (PCE) data appeared to signal that inflation is peaking, although energy and food prices are not expected to tame anytime soon given the current geopolitical backdrop.

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Macro picture

The US economy appears so far to have remained resilient amidst a bleak global economic outlook, while the other two powerhouses – the European Union (EU) and China – are facing strong headwinds. In Europe, a recent inflation reading drove a pledge to a faster tightening cycle, with some banks now pricing in a 50 basis point hike at the July or September meeting. Energy prices remain elevated, especially as the EU declared a quasi-total embargo on Russian oil, which is highly likely to be inflationary both directly – via sustained high oil prices – and indirectly – if Russia retaliates by disrupting gas supplies. The EU economy is highly sensitive to energy prices – as the EU is a large energy importer – and is now projected to slow down more markedly, potentially even to a recession by Q4 2022, according to an analysis by Goldman Sachs.

In China, while Shanghai citizens were finally free to move after two months of harsh COVID-related restrictions, the economic outlook remains clouded as the government refuses to give up its zero-COVID policy. Potential virus flares going forward may create more headwinds, and current economic projections may be subject to further downward revisions. 

Yieldstreet offered growth and income notes

As equity markets struggle to find a direction – with short relief rallies followed by selloffs – and fixed income is caught between inflation and recession fears, Yieldstreet offered access last week to structured notes – instruments that can help navigate wide market fluctuations. The offering includes both income and growth notes, with different payoffs – the former pay a fixed coupon subject to the underlying equity’s performance, the latter allow limited participation to the equity’s upside. Both structured notes may offer some level of downside protection. 

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