Welcome to February, where the weather is traditionally cold and grey (a seemingly appropriate reflection of investor sentiment after surviving the market turbulence of 2022). Continuing the pattern, January was another roller coaster of ups and downs, leaving investors still nauseous. However, despite concerns that the economy was headed toward a slowdown, many benchmark indexes posted solid gains in January! In fact, the Nasdaq Composite posted its best January performance since 2001!
In other good news, if you love roses, diamonds, and filet mignon, so will your wallet this Valentine’s Day; all three are less expensive this year, according to an analysis by TheBalanceMoney.com of the most recent inflation & retail data from December 2022. However, not everything’s rosy for the romantic holiday – chocolate, gold, and silver prices are up from last year. (See graphic below.) What’s the takeaway? Choose your purchases wisely.
Many of us have been feeling the pain of bloated grocery prices impacting our household budgets since spring 2021. The majority of those cost increases come as part of the general inflation trend. But if the soaring price of eggs has you feeling shell-shocked, blame the bird flu, not inflation. The bird flu outbreak has decimated poultry flocks, and the ensuing egg shortage drove the price of a dozen eggs to $4.25 in December, more than double the $1.79 average from 12 months prior.1
As we head down the runway towards tax season, start thinking about how you’ll file your taxes and if you need to hire someone to help -- April 18th will be here before you know it. And if you’re owed a tax refund, the sooner you file, the sooner you can reinvest what’s rightfully yours!
Let us know if you ever want to chat about your future goals or current economic conditions. We’re always ready to help.
1. Bureau of Labor Statistics via Federal Reserve Economic Data. "Average Price: Eggs, Grade A, Large (Cost per Dozen) in U.S. City Average."
Despite a bumpy ride throughout the month, stocks ended strong in January. The S&P 500 rose about 1.5% to finish January near 4,077, a gain of 6.3% for the month. That’s the large-cap index’s best monthly gain since October, and its best January since 2019, which is also true for the Dow. The Nasdaq Composite gained 10.7% -- its best January performance since 2001 and its best monthly performance since July. The Dow Jones Industrial Average rose 1.1% for a 2.9% monthly advance. Markets were up overall for the month, driven by signs of slowing inflation and hopes that the Federal Reserve might soon end its aggressive campaign of interest-rate hikes.
In U.S. Sector performance, several market sectors posted solid gains in January. Consumer Discretionary was up the most, with a gain of 15.0%, followed closely by Communication Services at 14.5%. While these two sectors were up double-digit percentage points, three sectors actually fell in January: Consumer Staples, Health Care, and Utilities. Recent economic data indicated that inflation may have peaked. However, the Federal Reserve and most central banks continued to stress further tightening.
Bond prices rose in January, pulling yields lower on widespread anticipation that the Federal Reserve (Fed) is nearing the end of its interest-rate hikes. Investors have been plowing back into bonds, drawn by elevated yields amid expectations that an economic slowdown will drive the Fed to stop its hikes and then shift to easing monetary policy later this year. Benchmark 5- and 10-year yields have dropped around 40bps as money managers and pension funds continued to shift funds from equities to long-dated bonds. At current levels, Treasuries are seen as an attractive hedge against a recession. However, signs of a slowdown have been mounting, with many companies bracing for a weaker outlook and consumers being squeezed.
In its continued effort to tame persistent inflation, the Federal Reserve raised the target federal funds rate for the 8th consecutive time on February 1st. At the meeting, the central bank approved a more modest .25 percentage point increase after recent signs that inflationary pressures have started to cool. The rate hike will correspond with a rise in the prime rate, sending financing costs higher for many forms of consumer borrowing and putting more pressure on households already under financial strain.
The average interest rate for a 30-year fixed-rate mortgage is now around 6.4%, up nearly 3% from last year’s 3.55% rate. This means buying a home will still be a challenge for many, even if home prices have come down just a bit. It will also likely translate to more expensive auto loans and student loans. However, there IS a bit of good news -- interest rates on savings accounts are finally inching upwards. Learn more about how high interest rates can benefit savers in this article from nerdwallet.
10 of the Unusual Species
As populated and well-traveled as our planet is, new species are still being discovered regularly. Surprisingly, scientists estimate that only 10% of all the species on the planet have been described.
Rrecently, the researchers at the California Academy of Sciences named 146 new species, including lizards, insects, flowering plants, sharks, lichens, and sea stars. It’s also important to note that although a species may be new to science, indigenous people are often familiar with it and may even have given it a local name.
Click here to see 10 of the species discovered in 2022. This diverse selection is quite interesting, including a tiny owl, a colorful bird, an endangered flowering tree, and a frog that looks like it’s made of chocolate. So, the next time you’re out for a walk in the woods, pay attention to your surroundings… who knows what you might discover!
THOUGHT FOR THE MONTH
Dow Jones Industrial Average: The Dow Jones Industrial Average® (The Dow®), is a price-weighted measure of 30 U.S. blue-chip companies. The index covers all industries except transportation and utilities.
Dow Jones U.S. Real Estate Total Return Index: The index is designed to track the performance of real estate investment trusts (REIT) and other companies that invest directly or indirectly in real estate through development, management, or ownership, including property agencies.
NASDAQ Composite: The NASDAQ Composite is a market-cap weighted index of all issues listed on the Nasdaq stock exchange. It is heavily weighted towards the technology sector.
S&P 500 Bond Index: The S&P 500® Bond Index is designed to be a corporate-bond counterpart to the S&P 500, which is widely regarded as the best single gauge of large-cap U.S. equities. Market value-weighted, the index seeks to measure the performance of U.S. corporate debt issued by constituents in the iconic S&P 500.
S&P 500 Consumer Discretionary: The S&P 500® Consumer Discretionary comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer discretionary sector.
S&P 500 Consumer Staples: The S&P 500® Consumer Staples comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer staples sector.
S&P 500 Energy: The S&P 500® Energy comprises those companies included in the S&P 500 that are classified as members of the GICS® energy sector.
S&P 500 Financials: The S&P 500® Financials comprises those companies included in the S&P 500 that are classified as members of the GICS® financials sector.
S&P 500 Index: The S&P 500® index is a market-cap weighted index of the largest 500 companies headquartered in the United States. The index covers approximately 80% of available market capitalization.
S&P 500 Utilities: The S&P 500® Utilities comprises those companies included in the S&P 500 that are classified as members of the GICS® utilities sector.
S&P U.S. Aggregate Bond Index: The S&P U.S. Aggregate Bond Index is designed to measure the performance of publicly issued U.S. dollar denominated investment-grade debt. The index is part of the S&P AggregateTM Bond Index family and includes U.S. treasuries, quasi-governments, corporates, taxable municipal bonds, foreign agency, supranational, federal agency, and non-U.S. debentures, covered bonds, and residential mortgage pass-throughs.
S&P U.S. Treasury Bond Index: The S&P U.S. Treasury Bond Index is a broad, comprehensive, market-value weighted index that seeks to measure the performance of the U.S. Treasury Bond market.
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Your Monthly Market Newsletter, February 2023
February 28, 2023