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Hope you are all doing well and that your 2023 is off to a good start. The major U.S. stock indexes improved on the previous week’s positive result, with the NASDAQ adding around 4.8%, the S&P 500 2.7%, and the Dow 2.0%. The latest results mark a reversal from year-end 2022, when the S&P 500 finished down for three weeks in a row. On Friday Maine welcomed a new billionaire, with one lucky individual winning the 1.35 billion dollar jackpot.   I have broken down this week’s update using scratch ticket lottery games.

The December inflation report would either validate the better market results or to dash hopes. U.S. prices rose at a 6.5% annual rate in December as measured by the Consumer Price Index, marking the smallest year-over-year increase since October 2021. Excluding food and energy costs, core inflation rose by 0.3% relative to the previous month, in line with economists’ average forecast.   Markets rallied as declining inflation could finally break the bank, meaning the Federal Reserve may start to think about pausing the rate hikes in the not too distant future.  Though I think we need to see two or three more months of declining inflation before the Fed pauses.

Recent economic data has stayed resilient, even as the Fed’s aggressively hikes.   The economy will eventually slow.  As the rate hikes usually hit the economy with a time lag. That is what leading economic indicators, such as the inverted yield curve and the decline in manufacturers’ new orders are telling us. Corporate earnings could come under pressure. A stock pickers market could develop as individual stocks could pop or drop on earnings reports. Investors got a small taste of that, as U.S. banks kicked off the fourth-quarter reporting season on Friday with mixed results. Analysts were forecasting that fourth-quarter earnings for companies in the S&P 500  will fall by an average of 3.9% ,so expectations are low. Earnings season will reveal the hidden gems in this market, as the companies that continue to show robust earning growth will outperform more dramatically as the economy worsens.

If you’d like to speak about your investments or your plan, my calendar link is below and you can schedule a phone or zoom appointment,