I bet no one thought a balloon would be front and center news this past weekend. I certainly did not! I must say, if the balloon did veer off course because of weather, why didn’t China simply let us know? My guess…. we may never know the reality.
Speaking of reality, Friday’s job report stating we created 517K jobs in January, adds significant confusion to our inflation situation. The unemployment rate fell to 3.4%, as more people re-entered the work force.
Over the last few months, economic data has been suggesting inflation is moderating. This led the Federal Reserve to raise rates by .25% last week. For the first time in a long time, Chairman Powell sounded dovish. Investors took this as an indication that rate hikes are almost over, and Powell will have to lower rates sometime later this year. The markets of course, responded positively.
It will be interesting to hear what Powell says on Tuesday when he speaks at the Economic Club of Washington, D.C. Will he walk back his dovishness?
We also have four other Fed speakers between Wednesday and Friday this week.
I am expecting the Fed to hike rates by .25% two more times, lifting the terminal rate to 5.25%. I do not expect the Fed to lower rates in 2023 unless disinflation really kicks in and the economy stalls. As of now, the economy is going fine, even though we are complaining everything is more expensive.
Corporate Reports ½ Way Over
With 50% of the S&P 500 companies reporting 4th quarter earnings, 70% have beaten their lowered estimates. Earnings so far have shrunk by 2.7% for the 4th quarter. This week, 17% of the S&P 500 are reporting.
Most investors expected corporate earnings and guidance to be far worse than we are currently experiencing. Let’s hope this continues and that the soft-landing folks are correct.
Markets So Far!!
Will the market continue moving higher?
So far this year, the Dow is up 2.4%, the S&P 500 7.86%. The Nasdaq and small caps are up double digits. This has surprised most investors, including myself.
Bonds are also higher as the Bloomberg Aggregate Bond Index is up 3.02%.
Oil, I am happy to say, is staying range bound for now. Oil finished this past Friday @ 73.39/barrel, down from 80.26 on December 31, 2022.
Natural Gas has plummeted from 4.47 on December 31, 2022, to 2.41 as of last Friday.
2023 has a long way to go, however it will move quickly. It is amazing, this time last year, the media was suggesting the 60/40 stock/bond portfolio was dead. Now suddenly, it is a good place to be!
The best course of action is to make sure you have a comprehensive financial plan, and your portfolio is properly aligned with your goals/desires, represented in your plan. If you have any questions about your situation, please do not hesitate to schedule a consultation.
As always, if any of your friends or family might benefit from this information, please feel free to share!