Interest rate

2023 - 3 - 11

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Image courtesy of "World Economic Forum"

US interest rate rises coming? Economics news to read this week (World Economic Forum)

Top economy stories: US signals larger interest rate rises; China seeks 'economic stability'; Japan narrowly avoids recession.

[UK economy grew by 0.3%](https://www.reuters.com/world/uk/uk-economy-grows-03-january-beating-forecasts-2023-03-10/) on the month in January, following a 0.5% dip in December. [Joe Biden has unveiled plans to raise taxes on the wealthy](https://www.reuters.com/world/us/biden-challenges-republicans-with-budget-that-raises-taxes-sets-up-2024-run-2023-03-09/) and boost federal spending. [Australia's central bank could pause its aggressive cycle of interest rate increases](https://www.reuters.com/world/australias-central-bank-says-it-is-closer-pausing-rate-hikes-2023-03-07/) as soon as April. [Japan narrowly avoided a recession in the fourth quarter of 2022](https://www.reuters.com/markets/asia/japans-economy-barely-grew-q4-weak-consumption-raises-policy-challenge-2023-03-09/), with GDP growth of just 0.1% following a contraction in the third quarter. [undemanding growth target removes any pressure to stimulate the economy further](https://www.economist.com/china/2023/03/05/interpreting-chinas-unambitious-growth-target)" and will prevent the further build-up of debt. And the British Chambers of Commerce says the [UK economy is on track to shrink less than expected this year](https://www.reuters.com/world/uk/uk-avoid-recession-this-year-outlook-still-weak-bcc-says-2023-03-08/), avoiding the two quarters of negative growth that mark a technical recession. [first major central bank to suspend its monetary tightening campaign](https://www.reuters.com/markets/rates-bonds/bank-canada-keeps-rates-hold-says-inflation-slowing-expected-2023-03-08/) in the face of an anticipated easing of high inflation. [Real wages fell by 4.1% in January compared with a year earlier](https://www.reuters.com/markets/asia/japans-january-real-wages-drop-fastest-pace-since-2014-2023-03-06/) – their fastest drop in nearly nine years, as four-decade-high inflation squeezed consumer purchasing power in the world's third-biggest economy. [Eurozone retail sales rebounded much less than expected in January](https://www.reuters.com/business/retail-consumer/euro-zone-retail-sales-weaker-than-expected-january-2023-03-06/) compared with December and were still lower than 12 months earlier, underlining the weakness of consumer demand and the broader economic slowdown. [Americans filing new claims for unemployment benefits has been falling](https://www.reuters.com/markets/us/us-weekly-jobless-claims-decline-further-2023-03-02/), pointing to sustained labour market strength. The slowdown was a result of three years of COVID-19 restrictions, a crisis in the country's vast property sector, a crackdown on private enterprise and weakening demand for Chinese exports. He also told the Senate Banking Committee that the Fed is prepared to move in larger steps if the "totality" of incoming information suggests tougher measures are needed to control inflation.

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Image courtesy of "NNN"

US signals possible interest rate hikes, China sets lower growth ... (NNN)

The US Federal Reserve may need to increase interest rates more than expected in response to strong economic data, according to Chair Jerome Powell.

[UK](https://nnn.ng/tag/uk/), the economy grew by 0.3% in January and is expected to avoid the two successive quarters of negative growth that constitute a technical recession. [](https://nnn.ng/hausa/#=nija hausa) [](https://nnn.ng/i/#=name shortner) [Foreign](https://nnn.ng/foreign/)

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Image courtesy of "Seeking Alpha"

IJT: Interest Rate Risks Are Unsupportive Of Growth Style (Seeking Alpha)

iShares S&P Small-Cap 600 Growth Fund targets US small caps capable of delivering strong sales, EPS growth, and momentum. Read why I rate IJT ETF as a Hold ...

With the backdrop being supportive of more sizeable interest rate increases, it is plausible to assume that the growth premium will shrink across the board. With that being said, I highlight that for the growth league, especially its mid-cap part, the nearest future is hardly cloudless. Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. And as fresh economic data which adds to the risk of the interest rates edging much higher has stultified the early 2023 rally, I believe the possibility of IJT to continue sliding is too high to consider buying into it right now. Most importantly, I found out that only 6.3% have a D+ rating and worse, which is rather adequate, especially for a fund tracking an index with no profitability screens except for the simple one incorporated in its parent index (i.e., the S&P 600 shuns companies which are incapable of delivering positive net earnings). As ~15.4% of the fund's net assets are allocated to financials, it is complicated to calculate the weighted-average EV/EBITDA ratio. [IVV](https://seekingalpha.com/symbol/IVV)). There are growth and value funds that are "growth" and "value" in name only. Next, I do not see a too-wide spread between the weighted-average Return on Equity and Return on Assets, the one that might be indicative of debt levels being intolerable. Nevertheless, this appeared to be a tailwind for quality, and I believe that the growth screen also indirectly contributed. [website](https://www.ishares.com/us/products/239773/ishares-sp-smallcap-600-growth-etf), it tracks the float-adjusted market cap-weighted S&P SmallCap 600 Growth Index. As of March 7, IJT had 372 holdings, with the principal ten accounting for less than 10% and the weighted-average market capitalization standing at about $2.75 billion, as per my calculations.

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