February 27, 2023
Is it good news or bad news?
The answer depends on your perspective. Last week, we learned that:
Consumer sentiment is at its highest level in more than a year. Consumers are feeling better about current economic conditions and the future. That said, the University of Michigan Index of Consumer Sentiment remains 20 points below its long-term average. Consumer expectations for inflation over the next year increased from 3.9 percent to 4.1 percent and, over the longer term, consumers anticipate inflation will average about 2.9 percent.
Americans spent more money in January. Consumer spending is the primary driver of economic growth in the United States. In January, “consumers’ spending increased and after-tax incomes rose…Taken together, these indicators are the latest evidence that the U.S. economy started the year on a strong note — bucking signs of a slowdown at the end of last year,” reported Courtenay Brown of Axios.
Business conditions improved in the U.S., overall. In the United States, business conditions improved as demand for services increased, reported Lucia Mutikani of Reuters. In February, the S&P Global Flash U.S. Composite PMI Output Index came in at 50.2. Readings above 50 indicate the economy is expanding. For the last seven months, the reading has been below 50.
“The long tails of fiscal stimulus, for example, have propped up the economy for far longer than anyone expected. Excess consumer savings and an ebullient labor market fueled demand for travel, restaurant dining, and other services, where spending still has room to grow. And years of low interest rates have transformed the debt dynamics for the overwhelming majority of U.S. households, leaving them largely shielded, through fixed-rate mortgages, from the impacts of the Federal Reserve’s primary tightening tool,” reported Megan Cassella of Barron’s.
Business conditions improved in many parts of the world. February’s Flash PMI readings were above 50 for many regions, including the Eurozone (52.3), the United Kingdom (53.0), Japan (50.7), and China (50.1).
Greater optimism, improving business conditions, higher incomes, and more spending appear to be positive developments. The kicker is that they helped push inflation in the wrong direction. One of the Federal Reserve’s favored inflation indices showed inflation moving higher from December to January. That’s not what the Fed wanted to see. It has been working aggressively to tame inflation and recent economic data suggests it has more to work to do.
Major U.S. stock indices finished the week lower, according to Nicholas Jasinski of Barron’s. Treasury yields rose across many maturities.
Weekly Focus – Think About It
“A day without laughter is a day wasted.”
—Charlie Chaplin, Comic actor
* These views are those of Carson Coaching, not the presenting Representative, the Representative’s Broker/Dealer, or Registered Investment Advisor, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm or broker/dealer.
* 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.
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* 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.
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* 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.
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* Consult your financial professional before making any investment decision.
https://www.barrons.com/articles/economy-recession-interest-rates-inflation-22dd9566?mod=hp_HERO (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/02-27-23_Barrons_What%20Everyone%20Got%20Wrong%20About%20the%20Economy_5.pdf)
https://www.barrons.com/articles/stock-market-dow-nasdaq-s-p-500-8f364ee2?refsec=the-trader&mod=topics_the-trader (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/02-27-23_Barrons_Any%20Way%20You%20Slice%20It%20Stocks%20Still%20Dont%20Look%20Cheap_11-1.pdf)