STRONG JANUARY EMPLOYMENT REPORT: In January, the U.S. economy added 467,000 net new jobs. The unemployment rate increased slightly to 4% from 3.9% last month. The Labor Force Participation Rate increased to 62.2% from 61.9% in December, a substantial one month increase. Wages in January were 5.7% higher than a year before. All of this happened in January when omicron was surging and daily reports of gloom slowed hiring and kept some job seekers home. In fact, the week of January 9-15 saw a record of 7.8 million people calling in sick. With omicron easing dramatically (if the trends shown below continue), February numbers may be even better than January’s.
(Sources: bls.gov/news.release/empsit.nr0.htm AND marketwatch.com/story/record-7-8-million-full-time-workers-called-in-sick-during-january) |
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| THE FED NOW MORE LIKELY TO RAISE RATES: With the January jobs report showing steady hiring, the Fed is now more likely to stick to their plan of raising rates next month and perhaps again in May and June. |
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| STOCKS RISE AGAIN: Despite more volatility and a pretty horrible Thursday, stocks ended the week decisively higher. Corporate earnings reports have been a major driver in both directions. On Thursday, the technology-focused NASDAQ Composite Index had its largest one-day loss in well over a year (since September 2020), but bounced back on Friday. Stocks were bolstered on Friday by Amazon’s 14% jump after it reported that its profits doubled during the holiday period. Snap shares soared 59% after it reported its very first quarterly profit. Pinterest rose 11% after reporting its first full-year profit. On Thursday, stocks were dragged down by Facebook (now Meta Platforms) which sank 26% after reporting declines in profits and a less than rosy outlook for the future. The strong jobs report also helped lift markets on Friday. |
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U.S. FEDERAL DEFICIT: In 2018, the U.S. federal deficit topped $20 trillion. As of January 31, it topped $30 trillion for the first time. As interest rates rise, the costs of sustaining the debt rises.
(Source: U.S. Treasury Department) |
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MIXED BAG: While we report on the S&P 500 on a weekly basis, that index shows how just one part of the markets are doing, large U.S. companies. As of late last week, what you see below are the one-year returns of various indices indicating how other types of investments have done. As you can see, the purple line which is the S&P 500 has done the best of this group. Coming in a distant second is the MSCI EAFE (brown line) which represents companies in foreign developed economies such as much of Europe and Japan. The MSCI ACWI (orange line) represents stocks from both developed and developing economies everywhere except the U.S. It has been barely positive. U.S. bonds are the blue line represented by the Bloomberg U.S. Aggregate bond index and it has provided a negative return of just over 3%. Small U.S. company stocks are represented by the Russell 2000 index (green line), and they are down 3.55%. Finally, bringing up the rear has been emerging market stocks, down double digits.
(Source: YCharts.com) |
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MORTGAGE RATES INCREASE: According to Mortgage News Daily, the average rate on a 30-year mortgage in the U.S. moved up to 3.85%. This is back up to rates seen in late 2019. This is a full percentage point higher than August 2021. As you can see in the graph below, rates are still historically very low, but up sharply from the recent lows.
(Sources: mortgagenewsdaily.com/mortgage-rates AND calculatedriskblog.com) |
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TENNESSEE JOINS THE NO-STATE-INCOME-TAX STATES: Beginning this year, Tennessee has completed its process of eliminating all state income taxes (they were phased out). Tennessee joins Florida, Texas, South Dakota, Wyoming, Nevada, Washington and Alaska as the states with no income tax. That is one factor when people decide where to go if they are moving in retirement. Coming in with the highest top marginal tax rates are California (13.3%), Hawaii (11.0%) and New Jersey (10.75%). The rest of the states range from 2.9% to 9.9%.
(Source: taxfoundation.org) |
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| CONTINUING TO WATCH THE DATA: Following the pattern of omicron elsewhere in the world, U.S. deaths have turned downward, following the quick and decisive turn downwards of infections and hospitalizations. U.S. reported deaths decreased by 5% this week. Global deaths are still rising, but should peak soon (bottom graph below). (Source: worldometers.info/coronavirus) |
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| HOSPITALIZATIONS AND GLOBAL INFECTIONS: The number of people in U.S. hospitals who are COVID positive plummeted this week decreasing by 14.2% (see graph below). U.S. reported infections are going down as fast as they went up (second graph below). Meanwhile, global infections (third graph below) have now taken the same dramatic downward turn so indicative of omicron. (Sources: covid.cdc.gov/covid-data-tracker AND worldometers.info/coronavirus/). |
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| OH TO BE IN YAP: Punxsutawney Phil saw his shadow Wednesday morning, predicting six more weeks of winter. The fix was in because it looked like a pretty cloudy day to me. Meanwhile, one of my former students, from when I was a teacher in Micronesia, snapped this picture last week from his home on the island of Yap. I wish I was there. Only one more full month of winter. |
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Our mission is to help you see the objective, find the path, and navigate past the obstacles to a more prosperous future.
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Douglas R. MacGray, J.D., C.F.P. ®
President
Stonecrop Wealth Advisors, LLC
225 Wilmington-West Chester Pike; Suite 200
Chadds Ford, PA 19317
Direct | Cell | Fax
(610) 628 4545
dmacgray@stonecropadvisors.com |
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| “The world is a severe schoolmaster, for its frowns are less dangerous than its smiles and flatteries, and it is a difficult task to keep in the path of wisdom.” Phillis Wheatley
“Go to the ant, you sluggard; consider its ways and be wise! It has no commander, no overseer or ruler, yet it stores its provisions in summer and gathers its food at harvest.” Proverbs 6:6-8 |
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SOURCES:
STOCKS RISE AGAIN: wsj.com/articles/global-stocks-markets-dow-update-02-04-2022 |
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| (c) 2022 Douglas R. MacGray, All Rights Reserved |
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*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 Barclays U.S. Aggregate: This is a measure of the U.S. bond markets. |
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