This week is expected to be an extremely eventful one with three major central banks meetings, a slew of economic data and large number of companies reporting. The Federal Reserve, European Central Bank and Bank of England are set to raise interest rates to their highest level since the global financial crisis, but the magnitude and the tone of their forward guidance is likely to differ.

The highlight of the week would be the FOMC meeting. Despite last year’s aggressive policy tightening, Fed officials are not done hiking yet and have signalled that two smaller rate increases are likely – one in February and a final one in March, as recessionary forces rise, and inflation slows.

Investors should brace for a critical week ahead as the Fed is anticipated to raise its federal funds rate by 25 basis point, which would be the second in a raw reduction of the hike size, bringing the range to 4.5% to 4.75%.

Market analysts predict a 98% chance of 25 basis point hike according to the CME’s FedWatch tool, making this an opportunity for shrewd investors to reassess their portfolios and make informed decisions. Fed’s Chair Powell press conference will be closely watched too as it may provide clues how much higher rates might go.

Q4 earnings season kicks off in earnest and will provide further insights into the economic conditions. More than 100 of the S&P 500 companies will report throughout the week providing information on how earnings and margins are faring in the current environment.

Big tech companies such as Apple, Alphabet, and Amazon will release earnings on Thursday, which could influence the markets as a whole and their forward guidance would be as closely watched as the Fed press conference on Wednesday. Investors are wary that tech companies struggle to grow while cutting costs ahead of a recession.

Meanwhile, the effects of China reversing COVID-19 restrictions and more moderate energy prices continue to buoy optimism, even amidst warnings from central bankers that higher inflation is still a concern. With this in mind, it is little wonder that this week promises to be one of the most action-packed in a while.

After a slew of layoffs by large-cap tech and financial firms in January, investors are keenly awaiting the Labor Department’s January nonfarm payrolls data release on Friday. Economists are expecting a slight decline in employment and average hourly earnings, and a modest rise in unemployment.

Overall, the US stock market’s impressive performance in 2023 is poised to lose steam as the Federal Reserve prepares to implement its eighth consecutive rate hike during its policy meeting this week and earnings could prove to be worse than feared.