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WEEKLY MARKET COMMENTARY | FEBRUARY 9, 2023
What do Samuel Clemens (a.k.a. Mark Twain) and the current economic expansion have in common?
Author and humorist Twain was prematurely reported to be dead. It first happened in 1897. Twain was on a speaking tour in London when rumors that he had fallen ill and died began to circulate. Then, about a decade later, The New York Times reported that a yacht Twain was on had sunk.
Ben Welter of the StarTribunewrote thatTwain responded to the latter story by saying, “I sincerely hope that the report is not true and I suggest that all my friends suspend judgment until such time as I can ascertain the true state of affairs.”
There has been a lot of speculation about the death of the current economic expansion in the United States, too. The Federal Reserve has increased the federal funds rate at an unprecedented pace in 2022 to slow economic growth and price increases. Economists, business leaders, and even Fed officials have indicated that a recession – a period of economic contraction – may be ahead.
Last week’s economic data suggests that reports about the death of economic growth may have been exaggerated. The Bureau of Labor Statistics reported that more than 500,000 jobs were created in January – about twice as many as economists expected.
“Hiring topped all economist estimates, putting to rest any concerns that a manufacturing downturn and layoffs in the technology sector translate into weaker hiring across the country — at least for now. Payroll gains were broad-based, as factories, retailers and restaurants added jobs. Even construction increased employment amid a slump in housing. The robust demand for labor also pulled in traditionally sidelined workers, including Black Americans, whose jobless rate matched a historic low of 5.4% last month,” reported Augusta Saraiva and Katia Dmitrieva of Bloomberg.”
In addition, last week the International Monetary Fund raised its growth forecast for 2023. The global economy is expected to expand by 2.9 percent this year, largely due to resilient demand in the United States, falling energy costs in Europe, and the reopening of China’s economy.
While the outlook for the economy appears to have improved, the outlook for company earnings remains mixed. About half of the companies in the Standard & Poor’s 500 Index have reported fourth quarter results so far and earnings are down 5.3 percent, year-over-year. “Looking ahead, analysts expect earnings declines for the first half of 2023, but earnings growth for the second half of 2023,” reported John Butters of FactSet.
Major U.S. stock indices finished the week mixed. The S&P 500 and Nasdaq Composite Indexes moved higher, while the Dow Jones Industrial Average finished slightly lower, reported Nicholas Jasinski of Barron’s. Treasury yields moved lower for much of last week before bouncing higher after the strong jobs report.
Sources:
https://www.startribune.com/may-5-1907-report-of-twain-s-death-greatly-exaggerated/200099081/
https://www.reuters.com/markets/us/new-fed-research-flags-rising-risk-us-recession-2022-12-30/
https://www.bloomberg.com/news/articles/2023-01-25/how-close-is-the-us-to-recession-why-experts-are-struggling-to-predict-it (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/02-06-23_Bloomberg_Is%20a%20US%20Recession%20Near_4.pdf)
https://www.bls.gov/news.release/empsit.nr0.htm
https://www.bloomberg.com/news/articles/2023-02-03/us-job-gains-post-surprise-surge-jobless-rate-hits-53-year-low?srnd=all (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/02-06-23_Bloomberg_US%20Payrolls%20Surprise%20with%20Surge%20as%20Jobless%20Rate%20Hits%2053-Year%20Low-6.pdf)
https://www.weforum.org/agenda/2023/02/imf-raises-growth-forecasts-for-2023-and-other-economy-stories-3-february/
https://insight.factset.com/sp-500-earnings-season-update-february-3-2023
https://www.barrons.com/articles/stock-market-rally-dow-nasdaq-s-p-500-51675469227?refsec=the-trader&mod=topics_the-trader (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/02-06-23_Barrons_The%20Stock%20Market%20is%20in%20the%20Mood%20to%20Rally_9.pdf)
https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value=2023
https://www.kiplinger.com/retirement/bipartisan-retirement-savings-package-in-massive-budget-bill
https://www.investor.gov/financial-tools-calculators/calculators/required-minimum-distribution-calculator
https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator [Calculator variables: $1 million, no additional contributions, three years, 6 percent interest rate, no variance, annual compounding]
https://www.cnbc.com/2023/01/03/3-changes-in-secure-2point0-for-required-minimum-distributions.html
https://tax.thomsonreuters.com/news/retirement-expert-secure-2-0s-impact-on-rmd-penalty-tax-collection-is-tbd/
https://www.goodreads.com/quotes
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