Market Recap and the Week Ahead | Inflation Easing
Declaring a recession is almost academic at this point. The best-case scenario would be a continuation of this rolling recession, as it would mean there isn’t a complete bottoming-out all at once… When you have certain pockets that are weak, you’ve got offsetting pockets of strength.”
- Liz Ann Sonders
Last week's market recap:
- The S&P 500 closed the week up 2.71%. Year-to-date the index is up 4.22%
- NASDAQ closed the week up 4.83%. YTD the index is up 5.88%
- U.S. Aggregate Bond index was up .88% for the week. YTD the index is up 2.74%
- Fed Funds Target rate is 4.50%
- 10-Year Treasury Rate decreased, ending the week at 3.49% down from 3.55% the prior week.
- The 1-Year Treasury is yielding 4.70%
- A 6 Month Treasury is yielding 4.79%
- If your savings account is still under 1%, you may want to find a new savings account.
The week ahead:
- Earnings Season Continues: Big Banks, Proctor & Gamble, Netflix, American Airlines, Schlumberger, etc.
- Producer Price Index (PPI) Inflation data
- Retail Sales
- Housing Starts, Building permits, and Existing Home Sales
Inflation is decreasing:
We’re seeing a decrease in inflation. December’s CPI (Consumer Price Index) was in-line with expectations. Food prices are moderating. Energy prices declined. Goods inflation fell for the third straight month (Used car prices have declined 6 months in a row). Shelter prices remain elevated, but both new leases and home prices have been declining. The CPI for Shelter Inflation has historically lagged home price changes due to how long it takes for new leases to roll over into a new contract. So Shelter may continue to put upward pressure on CPI through the first half of 2023, but it should rolls over later this year.
Markets are expecting the Fed to slow their rate hikes to 25bps in February. The Fed will probably want to see more evidence that inflation is cooling before they pause. Jerome Powell has made it clear they don’t want to risk a second spike of inflation. An overly hawkish Fed certainly remains a risk to the markets. The short term may be challenging, but the long term outlook should be bright for both stocks and bonds.
2023 Financial Planning Notes:
- Later age for RMDs
- Bigger contribution limits on retirement accounts
- Higher income limit for Roth IRA contributions
- Increased Standard Deductions
- Higher Marginal Tax Bracket Thresholds
- 529 rollovers to Roth IRAs (requirements need to be met)
- Higher threshold for 0% long-term capital gains
As always, let us know if you have any questions.
CRA Investment Committee
Matt Reynolds CPA, CFP®
Tom Reynolds, CPA
Robert T. Martin, CFA, CFP®
Gordon Shearer Jr., CFP®
Jeff Hilliard, CFP®, CRPC®
Joe McCaffrey, CFP®
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