The Fed is anticipated to be still hawkish, S&P 500 falls -1.1%

The United States stock market, the S&P 500, closed down -1.1% throughout last week's trading. This is the benchmark index's worst performance so far this year, caused by market sentiment due to concerns about the Fed. Last week's strong employment report made the market worried that the Fed would continue to raise interest rates. Based on Jerome Pow-ell's statement, the disinflation process has begun, but interest rate increases will still be needed to fight inflation. This exacerbates concerns that the Fed may have to remain hawkish for longer than previously anticipated. All S&P 500 sectors closed in red in last week's trading, except for the Energy sector which experienced an increase of +5.03% due to the increase in world oil prices. The Communication Services sector experienced the largest decline with -6.59%, followed by Consumer Discretionary with -2.22%.

Indonesia's GDP Grows 5.3%

Indonesia's Gross Domestic Product (GDP) or GDP report for 2022 is reported to have experienced growth of +5.3%. This is the biggest growth in the last nine years. This achievement was supported by the return of economic activity, followed by a significant increase in commodity prices. Export growth in 2022 was recorded to grow +14.9% driven by mineral fuels, steel and automotive products. Household consumption grew +4.9% driven by increased mobility and people's purchasing power due to the increase in minimum wages. Apart from that, investment growth was recorded at +3.3%, which is still below the level before the pandemic. Based on analyst expectations, investment growth this year is expected to weaken again due to production capacity utilization which has reached 77%, returning to pre-pandemic levels, as well as pressure in the political year in 2024. On the other hand, government spending was recorded to have decreased by -4.77%. Consensus expectations for 2023 GDP growth are in the range of 4.5 – 4.8%.

Retail Sales Index Grows Positively +1.7%

Based on a Bank Indonesia report, the retail sales index for January is estimated to contract compared to December, but will still grow positively to the level of 1.7% compared to the previous year. Bank Indonesia reported that this contraction occurred in almost all index components, which was a normalization of the seasonal pattern at the end of the year after increased consumption activity during the Christmas and New Year holidays. Sectors that reported an increase include telecommunications equipment and household equipment.

Key Takeaways:

The United States stock market index S&P 500 closed down -1.1% in last week's trading. This is the index's worst performance since the beginning of this year, caused by market sentiment due to concerns that the Fed will still take a longer hawkish position than previously anticipated, in order to reduce inflation even further.

For the domestic economy, Indonesia's Gross Domestic Product (GDP) or GDP for 2022 is reported to experience growth of +5.3%, which is the largest growth in the last nine years. This achievement was supported by the return of economic activity, followed by a significant increase in commodity prices. From the export side, export growth in 2022 was recorded at +14.9%. Meanwhile, household consumption grew +4.9%.

The Retail Sales Index for January is estimated to contract on a monthly basis, but will still grow positively to the level of 1.7% compared to the previous year, based on a Bank Indonesia report. Sectors that reported an increase include telecommunications equipment and household equipment.

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