Investors Keep a Close Eye on Post-Christmas Trading Updates

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This year’s reporting season will be critical for investors as they seek to assess the economy’s health in light of rising interest rates.

Corporate performance over the post-Christmas period will be closely watched, with analysts expecting a greater insight into the current state of consumer demand. 

According to broker UBS, a succession of forecast upgrades from retailers suggested a successful Christmas shopping season, indicating that predictions of a severe economic recession may have been exaggerated. However, in light of the share market’s January rise, what happened after the record-breaking Black Friday and Christmas shopping season is even more critical.

While UBS acknowledged that the good earnings momentum throughout the holiday season was predictable, it cautioned that business results could point to a softening of conditions in the first few weeks of 2023.

“We have identified that consumer euphoria is now behind us and that a cliff could be approaching, signs of which will be keenly monitored in the post new year trading updates companies provide,” UBS equity strategist Richard Schellbach said.

Following China’s reopening and the better weather in Europe, UBS admitted that the picture for the world economy in 2023 has become “less bleak” and that the near-term earnings concerns for stocks with domestic exposure have considerably diminished.

The benchmark index has grown by 16 per cent since October and is currently trading at a prospective price-to-earnings ratio of 14.8 times, which is higher than its long-term average of 14.5 times.

However, the broker is still determining whether the local stock market has already accounted for the excellent news.

“This leaves little room for re-rate, and as the economy decelerates through 2023, we see the index range bound,” Mr Schellbach said.

It is clear that this profit season has been highly unpredictable – and uncertainty remains as to what the results of post-Christmas trading will mean for investors and markets in the coming months. 

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