Monthly Economic Update – January 2023

Here you will find the latest economic information thru December. As always, don’t hesitate to call should you have any questions. We are here to help! ~ The Madison Poole Crew

Presented by Madison Poole, January 2023

In this month’s recap: Stocks struggled in December on renewed recession fears.

U.S. Markets

Stocks were under pressure in December on renewed recession fears and concerns that the Fed may keep rates higher than markets anticipated.
The Dow Jones Industrial Average lost 4.17 percent for the month, while the Standard & Poor’s 500 Index fell 5.90 percent. The tech-heavy Nasdaq composite dropped 8.73 percent.*

A Challenging December

After two solid months of gains, investor sentiment took a u-turn in December. Stocks opened the month lower on new data pointing to economic strength and the loosening of Covid restrictions in China. At one time, both may have earned positive views. They may now become reasons for the Fed to raise rates into 2023.

A Hawkish Fed

Stocks found temporary support from a lower-than-expected inflation report. Still, markets resumed their slide when a hawkish-sounding Fed Chair suggested rates may trend higher for longer than markets anticipated.

Inflation Yields to Recession Talk

Somewhat overlooked amid the recession talk was some encouraging news on the inflation front. The November Consumer Price Index (CPI) came below consensus expectations at a 0.1 percent increase and a 7.1 percent rise year-over-year. It was the fifth straight month of declining price increases.**

Inflation Yields to Recession Talk

Somewhat overlooked amid the recession talk was some encouraging news on the inflation front. The November Consumer Price Index (CPI) came below consensus expectations at a 0.1 percent increase and a 7.1 percent rise year-over-year. It was the fifth straight month of declining price increases.**

Later in the month, the Personal Consumption Expenditures (PCE) price index, the preferred inflation measure of the Fed, also saw moderating inflation, rising just 0.1 percent in November and 5.5 percent from a year earlier.***
Stocks closed the month lower with a quiet holiday week, capping a discouraging year for investors.

Sector Scorecard

All 11 market sectors were down in December. Communications Services (-6.83 percent), Consumer Discretionary (-11.64 percent), Consumer Staples (-3.42 percent), Energy (-4.04 percent), Financials (-5.81 percent), Industrials (-3.45 percent), Materials (-6.13 percent), Real Estate (-5.89 percent), Technology (-8.47 percent), Health Care (-2.28 percent) and Utilities (-1.30 percent) all were lower for the month.****

What Investors May Be Talking About in January

Expect the market spotlight to fall on three key dates in the month ahead.
The first will come on January 12th with the December Consumer Price Index report. A continued slowdown in inflation may lift some pressure on the Fed to raise interest rates.5
The second will be on January 26th, with the initial reading of the fourth-quarter Gross Domestic Product. A healthy number may relieve those worried about an imminent recession, or it may become a reason for the Fed to maintain its hawkish rate hike path.*****

Finally, the Federal Open Market Committee will open its two-day meeting on January 31st. The forward-looking markets tend to focus on what Fed Chair Powell says about the economy’s direction in the post-meeting press conference.5

[panel style=”default” text_align=”left”]CITATIONS:
*. WSJ.com, December 31, 2022
**. CNN.com, December 13, 2022
***. CNN.com, December 23, 2022
****. SectorSPDR.com, December 31, 2022
*****. Finance.Yahoo.com, January 2, 2023
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Madison Poole | 208-898-7668 | www.madisonpoole.com

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[divider style=”solid” color=”#032b65″ opacity=”1″ width=”1000px” placement=”equal”] [panel style=”default” text_align=”left”]Provided content is for overview and informational purposes only and is not intended and should not be relied upon as individualized tax, legal, fiduciary, or investment advice.
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