Markets “In A Nutshell” for May 22, 2023

Markets “In a Nutshell” for May 22, 2023

Investment Week at a Glance

Stocks finished higher for the week.  The Dow Jones Industrial Average rose 0.40%, the S&P 500 was up 1.6%, and the NASDAQ rose 3.00%. Foreign stocks (MSCI EAFE) were down, falling 0.5%. Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 3.70%.  (Data source: Wall Street Journal)

Economic Outlook

The consumer is what drives the United States economy as personal consumption makes up for 70% of the U.S. GDP. So far, despite inflation and recession worries, the consumer has been resilient, and in Q1 of 2023, consumption grew by 3.7%. This was the best pace in the past two years; however, we may begin to see some weakness. Some of the bigger retailers such as Walmart, Target, and Home Depot, reported some softness as the consumer is spending less each time they come in and that there is less demand for discretionary items such as clothing, electronics, and home goods. Another worry is that consumer confidence has fallen due to fears of a larger banking crisis and rising rates as the fight against inflation continues. Another worry is that jobless claims have begun ticking up in recent months as the 4-week average is up 28% from its recent low in Q4 of 2022. The market will continue to price in these data points as they come in and the outlook on the economy adjusts.

Recession Imminent?

Recession fears have persisted for a while now as the economy has dealt with Covid, inflation, supply chain issues, the war in Ukraine, and bank failures of recent. Despite all of these worries we still have not entered into a recession despite talks of a recession for quite some time. Now the outlook is we could see a recession in the 2nd half of 2023 as interest rate hikes start to have a real effect on the economy and banks begin to tighten credit conditions as a result of the recent bank failures. Despite these issues, the labor market has remained strong giving the consumer the ability to stay strong. Due to this a possible recession may be short and shallow as we saw in the early 2000s. Many investors and analysts believe a recession like we saw in 2007-2009 is very unlikely as the economy is in a better state and now that the Fed has raised rates they have room to move lower if a recession occurs.

Quiz:

Quiz

What is the current unemployment rate in the United States? (Scroll Down for Answer)

1.     3.4%
2.     3.9%
3.     4.7%
4.     5.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Answer below.

 

 

Have a Great Week!

 

 

 

 

 

 

 

 

 

Answer:

1.   3.4%.  The current unemployment rate is historically low and has been the driver for the US economy as the consumer has been able to find work rather easily. If the unemployment rate remains below 4% a deep recession would be very unlikely.