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Published: December 12, 2022

December 12, 2022 - Weekly Market Commentary

The Markets

What comes next?

The U.S. stock market tends to be a forward-looking vehicle. Investors make decisions today based on what they think may be ahead for the economy, and how economic change may affect the companies they’re considering for investment. Currently, key questions include:

  • Will inflation be lower in 2023?
  • Will Federal Reserve (Fed) policies change? When will they change?
  • Will economic growth remain strong next year? Or will it slow or contract?

Opinions about the answers to these questions vary, and that’s one reason markets have been volatile lately. For example, some think the U.S. economy is headed for:

  • A soft landing. This is the Goldilocks ideal. In December, a large investment bank said there was a 35 percent chance the United States is headed for a soft landing, which the bank defined as inflation falling to 4 percent, the Fed funds rate rising to 5 percent, and economic growth settling at 1 percent.
  • A period of stagflation. A November survey of 272 asset managers with $790 billion under management reported that 92 percent of respondents expected the United States to experience a period of stagflation over the next 12 months, reported Sagarika Jaisinghani of Bloomberg. Stagflation is characterized by above average inflation and slowing economic growth.
  • A recession. There is a diversity of opinion about whether the U.S. will experience a recession in 2023. The Fed put the odds of recession at 50 percent. However, “economists surveyed by Bloomberg [in November] saw a 65% chance of recession in the next year, based on the median estimate. A Bloomberg Economics model puts the probability at 100%,” reported Matthew Boesler of Bloomberg.

It’s important to remember the economy is not the stock market. It is just one of the many factors that influence share prices. Each of the economic possibilities would affect share prices and market sectors differently.

With so much uncertainty, it’s hard to know what will happen. As baseball great Yogi Berra said, “It’s tough to make predictions, especially about the future.” That’s why it’s a good idea to hold a well-allocated and diversified portfolio that targets your financial goals.

Last week, major U.S. stock indices finished lower, and the Treasury yield curve remained inverted.

Data as of 12/9/221-WeekY-T-D1-Year3-Year5-Year10-Year
Standard & Poor's 500 Index-3.4%-17.5%-15.7%7.9%8.1%10.7%
Dow Jones Global ex-U.S. Index-0.5-17.4-16.7-0.4-0.72.0
10-year Treasury Note (yield only)3.6N/A1.51.82.41.6
Gold (per ounce)0.6-1.31.17.17.60.5
Bloomberg Commodity Index-2.412.715.714.85.8-2.4

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. 

Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

FEELING SOME HOLIDAY STRESS?

Holidays can be wonderful, and they can be a lot. If the joy of the season is eclipsed by stress, anxiety or depression, here are some tips that can help.

  • Pet a pup. Find a few minutes to spend with your pets. Loving on animals – dogs, cats, bunnies, guinea pigs, reindeer – engages the social and emotional section of the human brain. As a result, it can help you cope when you feel stressed or depressed.
  • Find the humor. Humor can help, too. When kids find the gifts and unwrap them early, the cat tips the tree over – again, or your parents or in-laws say things they shouldn’t, try to find the ridiculous, over-the-top angle that makes it funny. If you just can’t, try smiling. Even a fake smile will cause endorphins to be released.
  • Reach out. Performing acts of kindness can lift your spirits during the holidays. Set up a food drive. Donate gifts to a homeless shelter. Make a charitable contribution to an animal rescue or another cause. Visit people in a nursing home. Run a race for a good cause. You get the idea.
  • Spend less. One of the biggest holiday stressors is money. Before you start shopping and entertaining, decide what you can afford to spend this year, and then stick to your budget. If you regularly overspend on gifts, decide how much you are going to spend and stick to it. Ways to control costs include making homemade gifts and donating to a good cause in the recipient’s name.
  • Just say “No.” You don’t have to accept every invitation this season. When you’re tired of people and celebrations, make time to do something that you enjoy. Listen to music. Take a walk. Watch funny videos. Read a book. Give yourself an opportunity to rest and recover.

We hope you have happy and healthy holidays!

Weekly Focus – Think About It

“Kindness in words creates confidence. Kindness in thinking creates profoundness. Kindness in giving creates love.”

—Lao Tzu, philosopher

Sources:

https://www.investopedia.com/how-stock-market-affects-economy-5296138

https://markets.businessinsider.com/news/stocks/goldman-sachs-david-solomon-federal-reserve-recession-stock-market-crash-2022-12

https://www.bloomberg.com/news/articles/2022-11-15/bofa-survey-shows-stagflation-fears-with-no-fed-pivot-in-sight (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/121222_Bloomberg_BofA%20Survey%20Shows%20Stagflation%20Fears_3.pdf)_

https://www.bloomberg.com/news/articles/2022-11-23/fed-staff-saw-odds-of-us-recession-in-next-year-as-about-50-50 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/121222_Bloomberg_Fed%20Staff%20Warn%20Chance%20of%20Recession%20now%2050%20Percent_4.pdf)

https://www.goodreads.com/quotes/261863-it-s-tough-to-make-predictions-especially-about-the-future

https://www.barrons.com/articles/stock-market-fed-meeting-51670633736?refsec=the-trader&mod=topics_the-trader (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/121222_Barrons_The%20Stock%20Market%20Had%20a%20Terrible%20Week_6.pdf)

https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202212

https://www.sciencedaily.com/releases/2022/10/221005141751.htm

https://www.verywellmind.com/maintain-a-sense-of-humor-3144888

https://www.apa.org/news/press/releases/2020/09/doing-good-boosts-health

https://www.beyondfinance.com/newsroom/beyond-finance-2022-holiday-financial-stress-survey/ https://www.goodreads.com/author/quotes/2622245.Lao_Tzu

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