The S&P 500 and the NASDAQ recorded weekly gains, bouncing back from negative results the previous two weeks. The S&P 500 finished just four points shy of a record high that it set three weeks earlier; the NASDAQ and the Dow were around a percentage point below their all-time peaks. If you were planning on pulling out some money from the market in the next few months to cover upcoming spending or to replenish cash after holiday season spending, now would be an alright time to do that. Last night, the U.S. hockey team beat Canada in a game that was emotionally charged from the puck drop. I have broken down this week’s update using quotes from 1980 Olympic hockey coach, Herb Brooks.
“It’s not what you accomplish in life that really counts, it’s what you overcome.” – Coach Herb Brooks
The stock market has continued to thrive despite two wars internationally, 17 rate hikes by the Federal reserve, a crazy election cycle, and elevated inflation. What else will it need to overcome? For starters, hotter-than-expected inflation. Core inflation, excluding volatile energy and food prices, rose at an annual rate of 3.3% in January. That result was above economists’ consensus forecast and slightly above the previous month’s annual figure.
Second, a less than accommodative U.S. Federal Reserve. Chair Jerome Powell said in congressional testimony that Fed policymakers need to see more progress in curbing inflation before considering further interest-rate cuts. Powell declined to specify the inflation rate that might trigger the Fed to approve a further cut. However, they have said multiple times previously that their target is 2%. Lastly, a slowing consumer. U.S. consumers trimmed their spending more than expected after the holiday shopping season. In January, retail sales fell 0.9%.. That was well below most economists’ expectations and marked the biggest monthly decline in a year. With all the headwinds out there I would not be shocked if the market pauses here or even pulls back slightly over the next month or two before resuming its march higher.
“This is your time. Now go out there and take it.” – Coach Herb Brooks
I feel ultimately the market will continue to march higher because US Companies continue to exceed their already lofty expectations. The current stock market excitement reflects that. With earnings season nearing an end, profits have continued to grow at a torrid pace. As of Friday, fourth-quarter net income is expected to rise 16.9% compared with the same quarter a year earlier. That projection is based on the three-quarters of S&P 500 companies that have already reported results and forecasts for companies that hadn’t yet posted results. That is a significant out performance as before earnings season, analysts had expected growth of 11.8%
“The highest compliment that you can pay me is to say that I work hard every day.” – Coach Herb Brooks
After a career of working hard for our nation, about 75,000 Federal employees accepted the Trump administration’s “deferred resignation” offer. The offer allows Federal employees to resign but be paid through Sept. 30. The deadline closed on Wednesday after a Federal judge lifted a pause on the program. The American Federation of Government Employees (AFGE), one of the plaintiffs in the lawsuit, said: “It’s not the end of that fight. AFGE’s lawyers are evaluating the decision and assessing next steps.” Could there be additional legal challenges? Sure. If you took the offer you should operate under the assumption that the offer will be valid and legal and that you will continue to be paid through September because the government is going to operate on that assumption unless told otherwise.
If you’d like to speak about your investments or your plan, or if it has been a while since our last review. Please use my calendar link below and schedule a phone or zoom appointment. Enjoy the game!
