Economy, Good or Not so?

The United States created 303,000 jobs in March with the unemployment rate sitting @ 3.8%.  Wages increased by 4.1%.

Perhaps your individual perspective is the answer.

This Saturday, Michelle and I took a ride to the “Container Store”, which sits in the huge Cherry Hill Mall parking lot.  We arrived at 3:00.  Finding a parking spot anywhere was a challenge.  It wasn’t the restaurants in the mall that were crowded as they opened @ 4.  People are not hesitant to part ways with their doe.

The week prior, we were in Puerto Rico for a little R&R.  The airport was mobbed, the resort was mobbed and the restaurants outside the resort were mobbed.  Talk about elevated prices!  No one seemed to care. 

Yes, prices for everything are elevated with no signs of abatement.  The difference, income levels have risen since the end of the Covid shutdown, affording people the ability to purchase more goods and services.

A year ago, there were 2 jobs for every worker.  This led to wages rising significantly for lower income workers.  As inflation is still impacting this cohort, the additional income is being spent which continues to drive our economy.

Corporate Profits and the Rate Cut Debate

Part of the reason for the stock market continuing to rise, corporate profitability has continued to improve.  This week we’ll start to hear a handful of 1st quarter profit reports.  Expectations, Corporate America’s profits will increase for the 3rd quarter in a row.  That is not indicative of a “bad” economy, at least for now.

This week the Fed and investors will gather more information to debate about interest rate cuts.

On Wednesday we’ll hear the CPI report, followed on Thursday by the PPI report.  The Fed’s target as everyone knows, is for inflation to moderate it’s increases to 2%.  The data so far this year does NOT suggest a slowing economy so far however many believe the Fed will still cut rates.

The Fed has 6 additional meetings in 2024.  5/1, 6/12, 7/31, 9/18, 11/7 and 12/18.

Hearing Powell speak, on one hand he wants to cut rates and on the other, he is concerned about inflation moderation stalling, or even increasing.  Perhaps he can cut rates 1 to 2 times to reduce the front end of the interest rate curve to normalize overall levels and suggest it’s a “preemptive” move.

Personally, I think Powell should continue to sit back and wait.  He can always cut rates anytime as well as increase rates if and when necessary. 

For now, the economy is moving nicely, (moving higher prices aside).  GDP for the 1st quarter of 2024 will most likely come in around 2% which won’t be too hot or too cold.

Perhaps we just need to get used the current level of interest rates.  Mortgage rates @ 2.75%-3% were simply not normal.  I do think rates, will in time moderate, however a 10-year US Treasury around 4.5% seems pretty fair.

Stocks paused last week

Most major stock indexes retreated last week with concerns over inflation or perhaps, the market just needs a little breather.

For the week the Dow fell (2.36%), the S&P 500 (.97%), the Nasdaq (1.01%) and the Russell 2000 (2.81%).

Over the pond foreign stocks followed the US lower (1.10%) however emerging markets rose .46%.

Oil, oh boy, rose another 4.29% and is now higher by 21% in 2024.  How will this impact the headline inflation numbers this week?

Bonds, responding to inflation data retreated last week, as the Bloomberg US Aggregate Index dropped (.55%).

Portfolio Positioning

Making sure your portfolio is positioned based on the specifics of your situation has always been a hallmark toward proper financial planning. 

Knowing where you will receive your income for the next few years and then having an asset allocation that is fitting and diversified should keep you in good shape for years to come.

Last year, being overweight technology stocks yielded rewards.  So far this year, having a more diversified portfolio has paid off.  My hope is this continues, as we need more sectors than technology to continue to move forward for both the economy and markets to flourish.

A final reminder for clients to upload or send in your 2023 income tax returns and to be on the watch for our new Video Podcast series later this spring.

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