Kaohoon Morning Brief – 12 June 2023

1) FSS recommends focusing on Fed’s meeting for a possible end of hike cycle

Finansia Syrus Securities (FSS) expected Thailand’s SET Index to move in a sideways to sideways-up trend within the range of 1,545-1,565 points as the market could cool down from slowing oil prices. The main focus this week should be the U.S. CPI for May and the FOMC meeting on policy rates. FSS noted that if U.S. inflation slows down, it could mark an end to rate-hike cycle by the central bank and should be positive to risk assets.


2) US Fed meeting and inflation

There is a 31% odds that the U.S. Federal Reserve would raise interest rates by 25 bps on Wednesday, according to Bloomberg consensus. There is currently more of a chance that the central bank would skip this month and raise rates again in the meeting late July where the current odds are 86%.

However, the consumer price index is due to report on June 13, hours before the Fed meeting, which could impact these probabilities. Inflation for May is expected to rise 4.1% YoY, compared to an increase of 4.9% a month earlier.


3) Goldman ups S&P 500 target to 4,500

Goldman raises S&P 500 year-end target to 4,500 from the previous 4,000, giving an 5% upside from the current level of 4,299 points. However, Goldman maintained 2023 EPS forecast at $224 to reflect a soft landing and is above the top-down consensus of $206.

Meanwhile, Goldman gave a 25% chance of the U.S. going into a recession in the next 12 months, a huge difference from the consensus of 65% probability.

The U.S. investment bank noted that the potential profit boost from AI has expanded the right tail for equities, while left tail risks from recession and hawkish policy by the Federal Reserve remained.