THE U.S. ECONOMY EXPANDED DURING THE FOURTH QUARTER OF 2022:  The U.S. economy, as measured by gross domestic product, grew by an annual rate of 2.9% in the fourth quarter of last year.  After shrinking in the first two quarters, the U.S. economy has now increased for two quarters in a row (it increased by 3.2% in the third quarter).  So, the U.S. economy expanded, but the rate of expansion slowed from the prior quarter.  Markets liked this:  Not so high that the Fed gets worried, but not so low that a recession is certain.

INCOME AND SPENDING:  The average personal income of Americans increased in December by 0.2%.  Their spending decreased by 0.2%.

STOCKS ACROSS THE BOARD RECORD GAINS:  All major U.S. stock indices rose last week.  Once again the largest catalyst was inflation, and this time it was the general mood that inflation is moderating.  With inflation consistently moving down, most are now expecting the Fed to raise interest rates at slower pace when it meets next week.  On Friday, the inflation gauge watched closely by the Fed, the Commerce Department’s consumption expenditures price index excluding food and energy, showed that this inflation measurement rose by 0.3% in December and 4.4% compared with the year earlier. The twelve-month number was 4.7% last month.  That was an encouraging report which helped fuel stock price rises.  This coming week, earnings reports of the tech giants will be released (Apple, Amazon, Facebook [Meta Platforms] and Google (Alphabet, Inc.).  Also reporting will be Merck, McDonald’s and Caterpillar.  All these reports are potential market movers.

LONGER-TERM PERFORMANCE:  Below are the annualized three-year and five-year numbers for these same indices.  

UNEMPLOYMENT:  The unemployment rate is at a historically low 3.5% in the United States.  13 states have unemployment below 3.0%, those being Utah, North and South Dakota, Florida, Minnesota, Nebraska, Vermont, New Hampshire, Alabama, Missouri, Idaho and Kansas.  The five states (one is actually not a state) with the highest unemployment rates (between 4.4% and 5.2%, still pretty good) are Delaware, Oregon, District of Colombia, Illinois and Nevada.

DIESEL PRICES NOT COMING DOWN SOON:  When you look at gas prices, you may not notice the outsized price of diesel if you do not have a diesel vehicle.  But these prices have been elevated for a while, and don’t show any signs of coming down any time soon. That is not good for inflation or the economy as diesel fuel is what moves products all around the country.  Prices rose to $5.82 per gallon last summer, and have come down about a dollar since.  The amount of diesel fuel available right now is about 28 million barrels below the five-year average.  The East Coast of the U.S. accounts for more than half of that shortage.  In June 2019, fire took out the Philadelphia Energy Solutions refinery that provided about 30% to 35% of diesel to the mid-Atlantic and Northeast.  That refinery is permanently off line.  Many refineries deferred maintenance during the COVID shutdowns, and the maintenance is coming due, which will slow production further.  World markets are feeling the pinch of the Russia/Ukraine war.  A mild winter has helped stabilize prices for now, but there is not a lot of hope for prices coming down substantially.

STONECROP WEALTH ADVISORS CORPORATE VIRTUES:  Last week, I informed you that we at Stonecrop had collaboratively agreed to five corporate virtues.  This week, I’ll list them, and in coming weeks, I’ll define them as they relate to Stonecrop and our work.  They are:

• Servanthood,
• Curiosity,
• Calmness,
• Courage, and
• Humor.

E-A-G-L-E-S, EAGLES!:  As many of you know, I grew up not far from the Patriots stadium, so I kind of have that team in my blood.  But when we raised three children in the Philadelphia area, we decided to encourage them to develop a rooting interest in the home team.  Now, like most in the area, they are what I might call “rabid” fans. One of my children actually splurged and will be there in section 131. Philadelphia does have loyal and emotionally invested fans for sure.  So, for the good of my family, and my colleagues at Stonecrop (also rabid fans), let’s go Eagles!  (I know it is always dangerous to do this when I am writing before the game and this won’t be sent until after the game, but I’m pretty confident they’ll win.)

Have a great week!

“He who is not contented with what he has, would not be contented with what he would like to have.”  Socrates

“They will soar on wings like eagles, they will run and not grow weary, they will walk and not grow faint.”  Isaiah 40:31 (NIV)

SOURCES:
STOCKS ACROSS THE BOARD RECORD GAINS:  wsj.com/articles/global-stocks-markets-dow-update AND wsj.com/articles/apple-amazon-meta-alphabet-tech-earnings
UNEMPLOYMENT:  bls.gov/web/laus/laumstrk.htm
DIESEL PRICES NOT COMING DOWN SOON: wsj.com/articles/the-outlook-for-diesel-supply-woes-arent-going-away-soon
THE U.S. ECONOMY EXPANDED IN THE FOURTH QUARTER OF 2022: bea.gov/news/2023/gross-domestic-product-fourth-quarter-and-year-2022-advance-estimate
INCOME AND SPENDING: bea.gov/news/2023/personal-income-and-outlays-december-2022

(c) 2023 A.D., Stonecrop Wealth Advisors, LLC, All Rights Reserved

*S&P 500: This is a measure of the performance of the 500 largest companies in the United States, and it a common index to track the performance of U.S. equity markets, especially the large cap markets. 
*MSCI All Country World Index X US: This is a broad measure of the performance of worldwide equity markets excluding the United States. 
*Bloomberg U.S. Aggregate: This is a measure of the U.S. bond markets.