Fed Looking To Zero In On Hot Economy

Despite numerous rate hikes, US economy remains strong

Author

Mark Roussin
February 21, 2023

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Market Talk ⏪

We continue to see a market lead by growth, particularly technology. This is evidenced by the growth we have seen in the S&P 500 and more importantly the Nasdaq to start the year. Meanwhile, the Dow Jones Industrial Average is lagging and actually posted its third consecutive negative week.

Commentary from the Federal Reserve last week continued to suggest the Fed will continue to hike rates for longer and eventually pause, keeping the terminal rate higher for longer. This is beginning to wipe away many analysts thoughts about rate CUTS in 2023, which seem less and less likely as we go on.

Last week we also got an updated read on CPI and PPI, both of which jumped over prior month. he consumer price index showed inflation rising 0.5% in January, which was higher than expected, but we saw the markets cheer at first before retreating. PPI gained 0.7% in January. We also got retail sales data for January which flew by expectations, suggesting the US economy continues to remain rather hot and that the Fed interest rate hikes are having little effect right now.

  • US economy remaining hot

  • Labor force remaining strong

  • Inflation rising

  • Interest rates still rising

This has improved the likelihood of a so-called “soft landing” which is why we have seen growth stocks climb higher like we have. I am still a believer that this is all over done and a correction is near.

Could this be the week? Well that is anyone’s guess as my magic 8 ball stopped working years ago.

On Wednesday this week we will get some updated Fed minutes, giving investors a better look into the Fed’s plans. With fresh economic data out, there is no doubt another 25 basis point hike is coming in the next meeting, but some are beginning to believe a 50 basis point hike could be coming.

We will see how the economic data looks this week and the Fed meeting minutes, which will be key for the markets.

It is really a tale of two different economies. On one hand we see strong retail sales and rising inflation, and on the other hand we continue to hear about layoffs and surging US consumer debt, which worries me.

US consumer debt hit a new record of $16.9 Trillion in Q4 as credit card debt hit an all-time high.

The markets continue to remain on loose footing, but there is always money to be made. Check our Cash Flow University where I show my options trades every week.

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US Markets 🇺🇸

Here is a performance summary for US Equities:

Here is a look at US Treasuries:

The Fear & Greed Index measures market sentiment based on the following seven factors: put/call ratios, junk bond demand, stock price breadth, market volatility, stock price strength, safe-haven demand, and market momentum.

When it comes to the Fear and Greed Index, the stock market continues to plow forward and we see the indux remain in the GREED section. Not much movement over the past week within the index. Currently, the index has a reading of 68, which is slightly below the prior week reading of 70.

Earnings on Deck 💰

The earnings reports are beginning to slow, with much of the S&P 500 already reported, but we still have some big names reporting this week, particularly out of the retail sector.

Notable Analyst Updates 📝

  • Baird downgrades Caterpillar to neutral

  • Goldman Sachs upgrades Occidental Petroleum to buy

  • Canaccord upgrades Generac to buy. Wells Fargo downgrades Generac to hold.

  • Citi initiates Coca-Cola as a buy

  • Citi initiates Procter & Gamble as a buy

This Week 📆

Monday

  • President’s Day (Market CLOSED)

Tuesday

  • S&P Global Composite PMI

  • Existing home sales

Wednesday

  • Fed minutes

  • New York Fed President John Williams speaks

Thursday

  • Chicago Fed National Activity Index

  • Jobless claims (week ending Feb. 11)

  • Q4 GDP

  • Kansas City Fed Manufacturing Index

Friday

  • Personal consumption expenditures

  • Consumer sentiment

  • New home sales

Other Resources 📺

If you have not done so yet, definitely check out my growing YouTube community where I publish weekly videos on Dividend Stocks I am looking at.

Here is a look at my latest video: 3 Monthly Paying Dividend Stocks

I also recently published a video discussing 3 High-Yield Dividend Stocks To Boost Your Dividend Income:

Here are a few others of my latest videos:

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Have questions? You can email me directly at [email protected].

Happy Investing!

Mark

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