February 6, 2023
What do Samuel Clemens (a.k.a. Mark Twain) and the current economic expansion have in common?
Author and humorist Twain was prematurely reported to be dead. It first happened in 1897. Twain was on a speaking tour in London when rumors that he had fallen ill and died began to circulate. Then, about a decade later, The New York Times reported that a yacht Twain was on had sunk.
Ben Welter of the StarTribune wrote that Twain responded to the latter story by saying, “I sincerely hope that the report is not true and I suggest that all my friends suspend judgment until such time as I can ascertain the true state of affairs.”
There has been a lot of speculation about the death of the current economic expansion in the United States, too. The Federal Reserve has increased the federal funds rate at an unprecedented pace in 2022 to slow economic growth and price increases. Economists, business leaders, and even Fed officials have indicated that a recession – a period of economic contraction – may be ahead.
Last week’s economic data suggests that reports about the death of economic growth may have been exaggerated. The Bureau of Labor Statistics reported that more than 500,000 jobs were created in January – about twice as many as economists expected.
“Hiring topped all economist estimates, putting to rest any concerns that a manufacturing downturn and layoffs in the technology sector translate into weaker hiring across the country — at least for now. Payroll gains were broad-based, as factories, retailers and restaurants added jobs. Even construction increased employment amid a slump in housing. The robust demand for labor also pulled in traditionally sidelined workers, including Black Americans, whose jobless rate matched a historic low of 5.4% last month,” reported Augusta Saraiva and Katia Dmitrieva of Bloomberg.”
In addition, last week the International Monetary Fund raised its growth forecast for 2023. The global economy is expected to expand by 2.9 percent this year, largely due to resilient demand in the United States, falling energy costs in Europe, and the reopening of China’s economy.
While the outlook for the economy appears to have improved, the outlook for company earnings remains mixed. About half of the companies in the Standard & Poor’s 500 Index have reported fourth quarter results so far and earnings are down 5.3 percent, year-over-year. “Looking ahead, analysts expect earnings declines for the first half of 2023, but earnings growth for the second half of 2023,” reported John Butters of FactSet.
Major U.S. stock indices finished the week mixed. The S&P 500 and Nasdaq Composite Indexes moved higher, while the Dow Jones Industrial Average finished slightly lower, reported Nicholas Jasinski of Barron’s. Treasury yields moved lower for much of last week before bouncing higher after the strong jobs report.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Private Advisor Group, a registered investment advisor. Private Advisor Group and Parks Wealth Management are separate entities from LPL Financial.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* These views are those of Carson Coaching, and not the presenting Representative, the Representative’s Broker/Dealer, or Registered Investment Advisor, and should not be construed as investment advice.
https://www.bloomberg.com/news/articles/2023-01-25/how-close-is-the-us-to-recession-why-experts-are-struggling-to-predict-it (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/02-06-23_Bloomberg_Is%20a%20US%20Recession%20Near_4.pdf)
https://www.bloomberg.com/news/articles/2023-02-03/us-job-gains-post-surprise-surge-jobless-rate-hits-53-year-low?srnd=all (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/02-06-23_Bloomberg_US%20Payrolls%20Surprise%20with%20Surge%20as%20Jobless%20Rate%20Hits%2053-Year%20Low-6.pdf)
https://www.barrons.com/articles/stock-market-rally-dow-nasdaq-s-p-500-51675469227?refsec=the-trader&mod=topics_the-trader (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/02-06-23_Barrons_The%20Stock%20Market%20is%20in%20the%20Mood%20to%20Rally_9.pdf)
https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator [Calculator variables: $1 million, no additional contributions, three years, 6 percent interest rate, no variance, annual compounding]