The big news last week came on two fronts. First, the Fed made their anticipated interest rate increase on Wednesday. The 0.25% rate hike was much less than the four 0.75% rate hikes we saw the Fed implement last year. This brings the federal funds rate to 4.5% – 4.75%. Future rate hikes of 0.25% are likely as the central bank has said their intended target for the federal funds rate is 5%. The Fed believes that is necessary to bring inflation back down to 2%.

Second was the release of the strong hiring report on Friday, which saw 517,000 jobs created in January. The chart below from the Labor Department shows just how strong the numbers were, as five-straight months of slowing employment growth were reversed. The official unemployment rate fell to 3.4%, a 53-year low.

The U.S. stock market posted another strong week of gains as fourth quarter earnings hold up. The main challenge is for the FANG stocks in the S&P 500. Facebook, Amazon, Netlix and Google…you could throw in Apple too. Earnings were mixed but even for those who reported numbers below analysts’ estimates, they posted gains last week. The concerns analysts are citing are a slowing of sharp increases in profitability. Apple, for example, posted its first quarterly revenue decline in nearly four years. Google reported its first drop in advertising revenue since the beginning of the pandemic. And Amazon reported growth that, while beating estimates, nonetheless moderated in its online shopping and cloud computing business.

Stock valuations definitely became inflated by the end of 2022. As I wrote in last week’s commentary, the pullback in stock prices last year has put the market in a more moderately priced position. We continue to watch the rest of fourth quarter earnings announcements over the next few weeks to help gauge market conditions.

If you have any questions, please contact me.

The Markets and Economy

• After cutting global growth projections a few months ago, the International Monetary Fund (IMF) predicts resilient demand, easing inflation and China’s reopening should allow the global economy to grow a bit faster. The previous 2.7% growth for 2023 has been increased to 2.9%.

• Memory-chip manufacturers may be facing a prolonged slump in demand. Large inventories combined with slowing global need for new electronics are causing prices to fall over 20%. The chip industry hopes China’s reopening after strict Covid restrictions may be what the industry needs for renewed demand.

• U.S. investors are taking advantage of higher interest rates as they bought a record $4.26 billion worth of bonds in January.

• Pay gains for U.S. workers cooled at the end of 2022, a new sign that inflation may be moderating. Fed officials noted they are watching the figures closely for signs that wage inflation might have peaked.

• A thirty second commercial for Super Bowl LVII is expected to cost $7,000,000 this year. That’s an 84% increase the $3.8 million charged ten years ago in 2013.

• According to research from Allspring Global Investments, retiring three years before age 65 more than doubles the chances of not being able to meet retirement income needs. Conversely, working as little as ten hours a week in the five years after turning age 65 cuts the chances of not having enough retirement income by more than half.

• Banks and credit card companies are setting aside reserves for possible loan losses if a U.S. recession occurs. Lenders are already seeing deliquency rates increase. Capital One set aside $1 billion while American Express increased its loan loss reserves by about a half billion dollars.

• The U.S. isn’t the only place inflation is easing. For the third consecutive month, inflation fell in the eurozone. As inflation is higher in the EU, the central bank is still raising rates. Last week, they raised rates by 0.5% taking the benchmark rate to 2.5%.

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The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

Consult your financial professional before making any investment decision. You cannot invest directly in an index. Past performance does not guarantee future results.

This newsletter was prepared by David M. Kover®. To unsubscribe from the Weekly Market Update please write us at 555 Eastport Centre Dr., Suite B, Valparaiso, IN 46383 or click this link:  Unsubscribe .

Note: All figures exclude reinvested dividends (if any). Sources: Bloomberg, Dorsey Wright & Associates, Inc. and The Wall Street Journal. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

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