Markets “In a Nutshell” for April 10, 2023
Investment Week at a Glance
Stocks finished mixed for the week. The Dow Jones Industrial Average rose 0.60%, the S&P 500 was down 0.1%, and the NASDAQ fell 1.10%. Foreign stocks (MSCI EAFE) were up, rising 0.4%. Bond prices were up for the week, with the 10-year U.S. Treasury ending the week at 3.30%. (Data source: Wall Street Journal)
Signs of Slowing Economy
For the past few months, there have been debates on whether a recession is imminent or if we are currently in a recession. Although hearing we may be entering a recession can be scary, the market will pay more attention to the data than if we ever officially enter a recession. Looking at some data, we see the economy is beginning to slow down which is not all bad news as this will help inflation come down. The labor market is beginning to show some weakness as wage growth has slowed and for the first time in two years the number of job openings fell below 10 million. Manufacturing activity has fallen to a 3-year low as the ISM manufacturing index fell to 46.3 and readings below 50 indicate a contraction in activity. Another weakness is housing as price gains have now been lower for 7 consecutive months. This data shows the economy may be weakening but it also shows the Fed’s rate hikes have been working and inflation should continue to come down.
US Dollar Worries
With the economy slowing and inflation high, concerns about the US dollar have emerged. Also, within the past couple of weeks, there have been headlines about Brazil, Russia, India, China, and South Africa looking into creating a currency to compete with the dollar and not using the dollar as the reserve currency for oil and other commodity trading. Although headlines like this could cause some fear, it is not out of the ordinary for these discussions to come up. The US dollar is still the leader in the World as the US dollar makes up nearly 60% of the global reserves. Over 80% of trades in the World are still done in the US dollar. The only region where the dollar was not the preferred trade currency is Europe where they prefer to use the Euro. Although headlines can cause panic, the US dollar remains strong globally and is in a position to continue to do so.
What is the current unemployment rate in the United States? (Scroll Down for Answer)
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2) 3.5%. The unemployment rate continues to be near decade lows despite seeing wage growth decline and more people filing for unemployment in the past few months. Many expect unemployment to rise as the Fed fights inflation but with it still remaining low, this makes a deep recession unlikely.