Markets “In a Nutshell” for April 17, 2023
Investment Week at a Glance
Stocks finished higher for the week. The Dow Jones Industrial Average rose 1.20%, the S&P 500 was up 0.8%, and the NASDAQ rose 0.30%. Foreign stocks (MSCI EAFE) were also up, rising 2.1%. Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 3.52%. (Data source: Wall Street Journal)
Inflation Continues to Cool Down
Inflation has been the main worry for investors for quite some time now as we saw multi-decade highs throughout last year. The good news is we have seen inflation go from 9.1% last June to 5.0% in March driven by a drop in energy and food prices from their peaks. The price of eggs has been talked about a lot as prices have skyrocketed, but in March alone egg prices dropped 11%. Although this 5% inflation is still much more than the Fed’s target of 2%, it is showing meaningful progress which is what the Fed and investors want to see. We will see if this decline in inflation is enough for the Fed to pause their rate hikes or if they continue to raise rates as their next meeting is scheduled for the first week of May. The market will pay close attention to that meeting and Powell’s remarks to see how close we are to the end of this rate hike cycle.
Consumer spending is what drives the US economy as personal consumption expenditures typically account for 70% of GDP in the United States. High inflation and rising rates put a strain on the consumer as they have to spend more for the same goods and services as well as having to pay higher interest rates on debt. Despite this, the consumer has remained strong but is finally starting to show some weakness as retail spending fell in March. Another indicator of the consumer slowing is that credit cards are beginning to carry a larger balance as there is now an all-time high of credit card debt in the United States. Another worry for the consumer is initial jobless claims have slowly been on the rise which shows the softening labor market. Wage growth has also slowed from 6% to 4.2% over the past 12 months which could slow spending as people are not seeing their wages rise as much as before.
How much credit card debt is there in the United States? (Scroll Down for Answer)
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3) $986 billion. According to the New York Fed, US consumers have racked up an all-time high on their credit cards despite the sharp decline we saw during the pandemic as people paid off debt and in Q1 of 2021 credit card debt stood at $770 Billion