ND&S Weekly Commentary 1.17.23 – Inflation Moderates in December

Hopes for a soft economic landing intensified last week as the U.S. inflation eased again in December. The Consumer Price Index (CPI) declined 0.1% from November and moderated to 6.5% from a year earlier … inflation peaked in June 2022 at an annual rate of 9.1%. Looking further out, with the inflation surge ebbing and barring any geopolitical unforeseen setback, the cooling inflation environment should lead to a more measured approach to monetary policy at future fed meetings in 2023.

For the week, the DJIA increased 2.01% while the S&P 500 gained 2.71%. The tech-heavy Nasdaq jumped 4.83% after many growth stocks hurt in 2022, recovered nicely on the week. International markets were also very strong with the MSCI EAFE Index (developed countries) finishing higher by 4.25% while emerging market equities (MSCI EM) added 4.18%. Small company stocks, represented by the Russell 2000, were strong as they tacked on 5.27% for the week. Fixed income, represented by the Bloomberg Aggregate, advanced 0.88% for the week as yields moved lower across the curve. As a result, the 10 YR US Treasury closed at a yield of 3.49% (down ~ 6 bps from the previous week’s closing yield of ~3.55%). Gold prices closed at $1,907/oz. – up 2.96%. Oil prices moved higher to close at $78.39 per barrel, up 6.4% on the week.

Earnings season got underway last week. Analysts expect a 4.1% year-over-year decline in Q4 S&P 500 earnings, the first contraction since Q3 2020 (Covid). Earnings reports from the financial sector will dominate the early part of the week, while the end of the week will have reports from several large consumer companies.

Markets will remain volatile as we head into earnings season. As mentioned, analysts are expecting earnings to decline overall for the first time in several years. Equity investors are hoping the momentum continues as stocks have started out of the gate strong in 2023 … Let’s make it another good week!

“Faith is taking the first step even when you don’t see the whole staircase.” – Dr. Martin Luther King Jr.