Market Update | January 30, 2023

The past couple of weeks in economic news provided something for everyone. There was enough new economic data to support both the “recession is coming” and the “soft landing” camps.

Corporate earnings reports, while underwhelming, so far have not appeared as bad as many analysts had feared. Investors are gearing up for another important week of corporate results, with over 100 companies in the S&P 500 index set to report results this week.

The fourth-quarter Gross Domestic Product (GDP) growth number indicated a solid, if weakening, posture compared to the third quarter. The U.S. economy expanded at a 2.9% annualized rate in the fourth quarter, slightly exceeding consensus estimates of 2.8% but down from the third quarter’s 3.2% growth rate.

In inflation news, the Personal Consumption Expenditures price index (the Federal Reserve’s preferred measure of inflation) rose 3.2% in the fourth quarter. That was lower than the third quarter’s 4.8% increase, though it remains above the Fed’s 2% inflation target rate.

The markets believe the Federal Reserve is all but certain to raise interest rates by 0.25% at their meeting this Wednesday. The bigger question remains: when will the Fed pause its hiking regime? Will the Fed achieve a “soft landing,” or will we indeed see a recession this year due, in part, to interest rates that the Fed pushed higher in a historical fashion last year?

While we don’t know the answers to those questions yet, we’re committed to staying up to date and helping you navigate your financial plan in any environment.

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