Market Update for the Month Ending January 31, 2023

Presented by Mark Gallagher

Markets Rebound in January

Markets rallied to start the year, with all three major U.S. indices seeing positive returns in January after experiencing declines in 2022. The S&P 500 rose 6.28 percent, the Dow Jones Industrial Average rose 2.93 percent, and the technology-heavy Nasdaq Composite led the way with a strong 10.72 percent gain. Equity markets were supported by falling long-term interest rates.

These positive returns came despite weakening fundamentals. Per Bloomberg Intelligence, as of January 31, 2023, with 45 percent of companies having reported actual earnings, the average earnings decline for the S&P 500 in the fourth quarter of 2022 was 2.3 percent. Although this is slightly better than the 3.3 percent decline forecasted at the start of earnings season, if earnings decline for the fourth quarter, it would represent the first quarter with a year-over-year decline since the third quarter of 2020. Analysts are currently forecasting continued earnings declines in the first half of 2023 as well. Fundamentals drive long-term market performance, so the weakness in earnings should be monitored.

While fundamentals were not supportive, technical factors were another story. All three major U.S. indices ended the month above their respective 200-day moving averages, which marked the first month that all three have finished above trend since December 2021. The 200-day moving average is a widely monitored technical indicator, as prolonged breaks above or below trend can signal shifting investor sentiment for an index. Although a one-month trend is not enough to say that investors are now bullish on U.S. equities, technical support to start the year was still an encouraging sign for investors.

The story was similar with international markets in January. The MSCI EAFE Index of developed international companies gained 8.10 percent while the MSCI Emerging Markets Index increased 7.91 percent. Falling interest rates and reopening efforts in China helped support international stocks to start the year. Technical factors were also supportive during the month, as both the developed and emerging market indices finished the month above their respective 200-day moving averages. This represents the first time that the MSCI Emerging Markets Index has finished a month above trend since June 2021.

Bond markets also had a strong start to the year. Long-term rates fell in January, as the 10-Year U.S. Treasury yield declined from 3.88 percent at the end of December to 3.52 percent at the end of January. This helped support bond prices as the Bloomberg U.S. Aggregate Bond Index gained 3.08 percent. High-yield bonds were also up to start the year. The Bloomberg U.S. Corporate High Yield Bond Index gained 3.81 percent in January. High-yield credit spreads tightened, which indicates that investors grew more comfortable with taking on additional credit risk at lower yields.

Falling Rates Support Markets

The solid start to the year for investors was due in large part to declining interest rates during the month. The drop in rates was in turn driven by signs of slowing inflation and expectations for slower rate hikes this year. Headline producer and consumer prices both declined in December, with the monthly drop in prices supporting slowing year-over-year price growth. Inflation is high on a year-over-year basis, but the December price reports showed encouraging signs of declining price pressure across the economy. Economist and consumer forecasts call for continued slowing inflation throughout the year, which is another positive sign that efforts to contain price growth are paying off.

Cooling inflation helped support increased investor expectations for a slowdown in the pace of Federal Reserve (Fed) rate hikes in 2023 compared to 2022. Futures markets project one additional 25 basis point (bp) hike this year following the 25 bps hike in February and the 4.25 percent of rate hikes we saw in 2022. If expectations prove to be accurate, it would represent a notable slowdown in the pace of rate hikes.

Economic Growth Slows

While the slowdown in inflation was a good sign for the economy and investors, other economic data reports released during the month showed signs of a continued economic slowdown. Consumer spending fell for the second consecutive month to end 2022, and business confidence and investment also slowed at year-end. Given the signs of economic slowdown, it’s possible that we’ll enter a recessionary environment at some point this year. That said, if we do see a recession in 2023, it’s expected to be mild.

Job growth remained strong at the end of 2022, which should help support the economy in the case of a potential recession. Consumer confidence also showed signs of improvement toward the end of last year and start of this year. The University of Michigan consumer sentiment index finished January at its highest level since April 2022, signaling increased consumer optimism to start the year. Improved consumer sentiment has historically supported consumer spending growth, so this confidence is another encouraging signal that economic fundamentals are relatively healthy despite the recent slowdown.

Additionally, a further slowdown in economic growth could encourage the Fed to keep rate hikes this year to a minimum, which would again support markets. Ultimately, while no one roots for a recession, relatively healthy economic fundamentals indicate that a recession in 2023 would likely be mild and could benefit investors and the economy in the long run.

One sector that’s seen a notable slowdown already is the housing sector. Housing sales continued to fall at year-end, due to high prices and mortgage rates along with a lack of supply of homes for sale. As you can see in Figure 1, the annualized pace of existing home sales fell throughout the course of last year, with the December result bringing the pace of sales to its lowest level since 2010. The housing sector will be important to monitor going forward as housing costs make up a large portion of consumer inflation. The slowdown in housing sales has been challenging for prospective home sellers over the past year. We started to see signs of declining housing prices toward year-end, however, which could help support slower inflation later this year if the trend continues.

Figure 1. Total Existing Home Sales, Seasonally Adjusted Annualized Rate, 2010–Present

Risks Remain

It was a positive start to the year for investors, but there are very real market risks to monitor. The primary risk here in the U.S. is political, as the debt ceiling confrontation is set to drive uncertainty for markets and the economy until it’s resolved. While we’ve seen similar standoffs in the past that have been resolved before a potential government default, this process could play out over the course of several months and markets would likely face additional volatility if a compromise cannot be reached in a timely manner. Investors will also be keeping an eye on equity fundamentals given the expected earnings decline in the fourth quarter and analyst forecasts for continued earnings declines in the first half of 2023.

International risks should also be monitored as uncertainty overseas remains. Even though the direct market impact from the Russian invasion of Ukraine declined throughout 2022, the continued conflict could lead to further flare ups and uncertainty for the region and investors. Additionally, China’s efforts to reopen its economy bear watching, as any slowdown in the reopening process could spook investors.

It’s also important to remember that other risks might materialize and negatively impact markets at any time. Last year was a good example of the impact that unknown risks present, as the Russian invasion of Ukraine and the surge in inflation year drove investors across asset classes into the red. The market impact from those risks diminished but serve as a reminder that we may see further turbulence ahead.

Ultimately, there are a number of risks for investors as we kick off 2023. On the whole, however, the picture is relatively positive. While there is certainly the potential for short-term market turbulence in the months ahead, the relatively solid economic backdrop should help support long-term performance. Given the prospects for more short-term uncertainty, a well-diversified portfolio that matches investor goals with timelines remains the best path forward for most. As always, you should reach out to your financial advisor to discuss your current plan if you have concerns.

All information according to Bloomberg, unless stated otherwise.

Disclosure: Certain sections of this commentary contain forward-looking statements based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets. All indices are unmanaged and investors cannot invest directly into an index. The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip stocks. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. The Bloomberg Aggregate Bond Index is an unmanaged market value-weighted index representing securities that are SEC-registered, taxable, and dollar-denominated. It covers the U.S. investment-grade fixed-rate bond market, with index components for a combination of the Bloomberg government and corporate securities, mortgage-backed pass-through securities, and asset-backed securities. The Bloomberg U.S. Corporate High Yield Index covers the USD-denominated, non-investment-grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below.

Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Ave. Suite #304, North Saint Paul, MN 55109. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 651-774-8759 or at mark@markgallagher.com

Authored by Brad McMillan, CFA®, CAIA, MAI, managing principal, chief investment officer, and Sam Millette, manager, fixed income, at Commonwealth Financial Network®.

© 2023 Commonwealth Financial Network®

Weekly Market Update, February 6, 2023

Presented by Mark Gallagher                                  

General Market News

  • The Federal Reserve (Fed) increased its policy rate by 25 basis points (bps) at last week’s Federal Open Market Committee (FOMC) meeting, bringing the target range between 4.5 and 4.75 percent. This marks a slowdown in pace for the Fed’s rate hikes, but Chairman Jerome Powell aimed to avoid giving any indication that the job was close to done. “Inflation data received over the past three months shows a welcome reduction in the monthly pace of increases,” Powell said in his post-meeting press conference. “And while recent developments are encouraging, we will need substantially more evidence to be confident that inflation is on a sustained downward path.” While acknowledging that, “We can now say, I think for the first time, that the disinflationary process has started,” he went on to note that it would be “very premature to declare victory or to think we really got this.” U.S. Treasury yields changed modestly over last week. The 2-year and 5-year gained 2 bps to (4.2 percent) and 6 bps (to 3.66 percent), respectively. The 10-year and 30-year fell 12 bps (to 3.39 percent), and 8 bps (to 3.54 percent).
  • The Russell 2000 and Nasdaq Composite indices led the way last week as investors interpreted the FOMC’s January rate decision. The slower increase of 25 bps from December was just half of December’s increase of 50 bps. While widely expected, the market rallied on the FOMC slowing its pace of rate increases. The slower pace led investors to speculate that the Fed was near the end of its quest of taking policy actions to tame inflation. The top-performing sectors were communication services, technology, and consumer discretionary. This came as Meta Platforms (META) announced a greater reduction of expenses by $5–10 billion and a $40 billion stock buyback plan. Technology and consumer discretionary moved higher despite weakness in Amazon and Apple earnings. Sectors that struggled last week included energy, utilities, and health care. Stocks closed lower on Friday as stronger-than-expected employment report gave the Fed an additional reason to continue rate hikes.
  • Last week was a busy one in terms economic policy and releases. Tuesday saw the release of the Conference Board’s Consumer Confidence Index for January. Consumer confidence declined modestly during the month, but the index remained well above the recent low of 95.3 that it hit in July 2022. Consumer views on the present economic situation improved to start the year; however, souring expectations lead to a headline decline for the index.
  • The FOMC announced its federal funds rate decision on Wednesday. The Fed hiked the federal funds rate by 25 bps at its February meeting, which was in line with investor and economist expectations.
  • Friday wrapped with the employment report and ISM Services index for January. Hiring surged past expectations in January, with 517,000 jobs added during the month against calls for a more modest 188,000 additional jobs. The unemployment rate also unexpectedly declined to a 53-year low of 3.4 percent to start the year. Service sector confidence rebounded notably in January following a sharp decline in December, driven by increased demand for services, as new orders and business activity improved.
    Equity Index Week-to-Date Month-to-Date Year-to-Date 12-Month
    S&P 500 1.64% 1.48% 7.86% -6.57%
    Nasdaq Composite 3.33% 3.65% 14.77% –14.12%
    DJIA –0.15% –0.47% 2.44% –1.28%
    MSCI EAFE 0.46% 0.88% 9.05% –3.07%
    MSCI Emerging Markets –1.18% 0.70% 8.65% –12.44%
    Russell 2000 3.90% 2.79% 12.81% 0.60%

    Source: Bloomberg, as of February 3, 2023

    Fixed Income Index Month-to-Date Year-to-Date 12-Month
    U.S. Broad Market –0.05% 3.02% –7.56%
    U.S. Treasury –0.22% 2.28% –7.91%
    U.S. Mortgages 0.06% 3.36% –6.77%
    Municipal Bond 0.12% 2.99% –3.59%

    Source: Bloomberg, as of February 3, 2023

     

    What to Look Forward To

    This week will be on the lighter side in terms of economic data. Tuesday will see the release of the trade balance and consumer credit reports. The monthly trade deficit is expected to widen in December following a larger-than-expected tightening in November.

     

    Finally, the week will wrap Friday with the University of Michigan consumer sentiment survey. Consumer sentiment is expected to increase modestly, which would mark three consecutive months of improving confidence.

     

    Disclosures: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index. The Bloomberg US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. One basis point is equal to 1/100th of 1 percent, or 0.01 percent.

    Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Ave. Suite #304, North Saint Paul, MN 55109. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 651-774-8759 or at mark@markgallagher.com

    Authored by the Investment Research team at Commonwealth Financial Network.

    © 2023 Commonwealth Financial Network®

Weekly Market Update, January 30, 2023

Presented by Mark Gallagher                                  

General Market News

  • The future path of interest rates is uncertain for 2023, but according to Bloomberg’s economic forecast, the average Bloomberg surveyed economist expects to see another half percent of increases in the first quarter of the year before levels remain stable through the second and third quarters. The Federal Reserve (Fed) is scheduled to announce its next rate decision this week, on Wednesday, February 1. Consensus expectations are pointing to a 25 basis point (bp) increase. Some analysts, however, aren’t ruling out a more hawkish 50 bps hike as recent indicators have shown easing financial conditions and softening inflation. Fed Chair Powell’s post-meeting press conference will be closely monitored for forward guidance to get a better sense of how high rates are expected to go and for how long. Since markets have been pricing in 2023 rate cuts despite Fed officials’ rebukes of such expectations, Powell will likely tread carefully and avoid giving any signals that the Federal Open Market Committee’s (FOMC) foot may come off the inflation-fighting pedal anytime soon. U.S. Treasury yields were up modestly last week. The 2-year, 5-year, 10-year, and 30-year gained 6 bps (to 4.21 percent), 11 bps (to 3.64 percent), 7 bps (to 3.55 percent), and 2 bps (to 3.68 percent), respectively.
  • The Nasdaq Composite Index led the way last week as global equities rallied. Earnings from Microsoft and Tesla helped support the moves up in technology and auto stocks. Additionally, American Express and Capital One Financial were both up more than 10 percent on the back of better-than-expected results. That said, last week was not all good news; 3M, Dow Chemical, and Newell Brands all announced workforce reductions. Additionally, Intel shares fell by more than 6 percent on Friday after the company reported a larger-than-expected revenue decline and a net loss of $644 million for the quarter. The company was hit by softening demand for its chips as well as higher expenses at its factories, which weighed on overall margins. This week will be another big week of earnings with Exxon, Pfizer, McDonalds, UPS, Caterpillar, Meta Platforms, Apple, Alphabet, and Amazon as just some of the names slated to report.
  • Last week’s data focused on overall economic growth as well as personal spending and income. Thursday saw the release of the advanced estimate of fourth-quarter GDP. The fourth-quarter GDP report showed that the economy grew more than expected. Personal consumption slowed during the quarter, although the 2.1 percent annualized increase in consumption to end the year was still solid on an historical basis. Also released on Thursday was durable goods orders Headline and core durable goods orders both came in above expectations to end the year. The surge in headline orders was largely due to a spike in volatile transportation orders.
  • The week wrapped on Friday with the personal income and spending reports for December. While personal income continued to grow, spending fell for the second consecutive month.
Equity Index Week-to-Date Month-to-Date Year-to-Date 12-Month
S&P 500 2.48% 6.11% 6.11% –6.63%
Nasdaq Composite 4.32% 11.07% 11.07% –14.89%
DJIA 1.81% 2.6% 2.6% –0.08%
MSCI EAFE 1.4% 8.55% 8.55% –1.5%
MSCI Emerging Markets 1.44% 9.95% 9.95% –9.16%
Russell 2000 2.37% 8.58% 8.58% –1.5%

Source: Bloomberg, as of January 27, 2023

Fixed Income Index Month-to-Date Year-to-Date 12-Month
U.S. Broad Market 2.99% 2.99% –8.46%
U.S. Treasury 2.33% 2.33% –8.76%
U.S. Mortgages 3.45% 3.45% –7.35%
Municipal Bond 2.83% 2.83% –3.32%

Source: Bloomberg, as of January 27, 2023

What to Look Forward To

This week will be a busy one in terms of economic policy and releases, starting with the release of the Conference Board Consumer Confidence Index data for January on Tuesday. Economists expect to see slightly better consumer confidence in January.

Wednesday will see the FOMC’s federal funds rate decision. The Fed is expected to hike the federal funds rate by 25 bps at its February meeting, as the central bank aims to slow the pace of rate hikes in 2023. Also out on the same day will be the ISM Manufacturing index report for January. Manufacturer confidence is expected to decline modestly and remain in contractionary territory to start the year.

Friday will see the release of the employment report and ISM Services index data for January. The pace of hiring is set to slow again; however, even with the anticipated slowdown, hiring is expected to remain healthy on an historical basis. Service sector confidence is expected to partially rebound in January after suffering from a much larger-than-expected decline in December. If estimates prove to be accurate, the index would start the year in expansionary territory.

Disclosures: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index. The Bloomberg US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. One basis point is equal to 1/100th of 1 percent, or 0.01 percent.

Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Ave. Suite #304, North Saint Paul, MN 55109. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 651-774-8759 or at mark@markgallagher.com

Authored by the Investment Research team at Commonwealth Financial Network.

© 2023 Commonwealth Financial Network®

Weekly Market Update, January 23, 2023

Presented by Mark Gallagher

General Market News

  • As the Federal Open Market Committee (FOMC) enters the quiet period leading up to its next policy meeting (January 31–February 1), the average Bloomberg surveyed economist expects to see another half percent of increases in the first quarter before levels remain stable through the second and third quarters. Inflation data has shown recent signs of softening, but Federal Reserve (Fed) officials will require more convincing signs before there are any serious conversations about stopping its cycle. Fed Governor Lael Brainard explained, “Even with recent moderation, inflation remains high, and policy will need to be sufficiently restrictive for some time to make sure inflation returns to 2 percent on a sustained basis.” Still, as we approach the February 1 FOMC rate decision, futures markets are confidently pricing in a smaller hike of 25 basis points (bps). This marks a significant downshift after a string of four 75 bps hikes and one 50 bps hike in 2022. Speaking to the possibility of a quarter percentage point hike, Brainard noted, “This will enable us to assess more data as we move the policy rate closer to a sufficiently restrictive level, taking into account the risks around our dual-mandate goals.” U.S. Treasury yields didn’t see much movement last week. The 2-, 5-, and 10-year were down 7 bps, to 4.17 percent, 3.54 percent, and 3.44 percent, respectively. The 30-year ended 1 bp lower at 3.6 percent.
  • The Nasdaq Composite outperformed the Dow Jones Industrial Average last week as growth equities outperformed value equities. The outperformance of the Nasdaq was due to the drop in Treasury yields on the back of weaker-than-expected retail sales for December and softer-than-expected inflationary data in the form of the Producer Price Index (PPI). The PPI, which measures the average change over time in the selling prices received by domestic producers, fell 0.5 percent in December versus 0.1 percent expected. As a result, the economy showed hints of slowing faster than expected and fueled hopes that the Fed will ease the magnitude and pace of its rate hikes in 2023. The falling Treasury yields translate into a lower cost of capital for communication services, energy, technology, and consumer discretionary, which all outperformed. Industrials, utilities, and consumer staples lagged.
  • The highlights of last week came on Wednesday with the release of the retail sales, PPI, and industrial production data for December. Headline and core retail sales both by more than expected to end the year. Producer prices fell more than expected in December, due in part to falling gas prices during the month. Industrial production also fell more than expected in December, driven by a larger than expected 1.3 percent decline in manufacturing production.
  • The week wrapped on Friday with existing home sales for December. Existing home sales fell less than expected in December; however, the annualized pace of sales fell to its lowest level since 2010 to end the year.
    Equity Index Week-to-Date Month-to-Date Year-to-Date 12-Month
    S&P 500 –0.65% 3.55% 3.55% –8.17%
    Nasdaq Composite 0.55% 6.47% 6.47% –18.40%
    DJIA –2.66% 0.78% 0.78% –0.54%
    MSCI EAFE 0.01% 7.05% 7.05% –6.36%
    MSCI Emerging Markets 0.63% 8.39% 8.39% –14.27%
    Russell 2000 –1.04% 6.06% 6.06% –4.71%

    Source: Bloomberg, as of January 20, 2023

    Fixed Income Index Month-to-Date Year-to-Date 12-Month
    U.S. Broad Market 2.89% 2.89% –8.88%
    U.S. Treasury 2.37% 2.37% –8.98%
    U.S. Mortgages 3.28% 3.28% –7.49%
    Municipal Bond 2.83% 2.83% –4.61%

    Source: Bloomberg, as of January 20, 2023

    What to Look Forward To

    This week’s data will focus on economic growth, durable goods, and personal spending and income.

    Thursday will see the release of advance estimate fourth quarter GDP growth and preliminary estimate durable goods orders data for December. Economists expect to see continued signs of economic growth when the fourth quarter GDP report is released. Personal consumption growth is set to rise during the quarter, supporting overall economic growth. Orders of durable goods are set to rise in December, driven in part by an increase in volatile transportation orders.

    Friday will see the release of personal income and personal spending reports for December. Both are expected to come in mixed, with economists projecting a modest increase for incomes during the month, while spending is set to drop.

    Disclosures: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index. The Bloomberg US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. One basis point is equal to 1/100th of 1 percent, or 0.01 percent.

    Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Ave. Suite #304, North Saint Paul, MN 55109. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 651-774-8759 or at mark@markgallagher.com

    Authored by the Investment Research team at Commonwealth Financial Network.

    © 2023 Commonwealth Financial Network®