JUMP IN RETAIL SALES:  January retail sales were 3.0% higher than December (seasonally adjusted) and 6.4% higher than January of 2022.  This was the largest one month gain in two years indicating that U.S. economic growth picked up to start the year.  Much of the increased spending was for vehicles, furniture, clothing and dining out.  Spending on restaurants was up 7.2%!  

INFLATION MIXED BAG:  In January, the Consumer Price Index rose 0.5%.  Over twelve months, the CPI is up 6.4%.  That number was 6.5% last month, so the headline number decreased for the seventh straight month.  The core CPI number which excludes gasoline and food similarly decreased slightly from 5.6% to 5.5%.  After flattening in recent months, prices for non-food commodities, energy and used vehicles rose 0.5%.  We were hoping that the supply-chain-affected goods in the CPI numbers were over, but not so fast.  Prices for components, supplies and capital equipment all rose more than they have in more than half a year.  Some of these prices may have been fueled by the U.S. consumer who got very active again last month (see above).  The February CPI numbers will come in on March 14, one day before the Fed begins its next two day meeting (and presumably announces its next rate hike).

WHICH WAY ARE WE GOING?:  The resounding, definitive answer to this question last week was:  “We don’t know.”  The data is pointing toward lowering but still pesky inflation creates lack of clarity on what the Fed will do.  Uncertainty is rarely a good thing in the investing markets, and that uncertainty led to an indecisive week.  The S&P 500 ended up slightly negative but the NASDAQ Composite index ended the week up 0.6%.  It is probably going to become more and more clear that the Fed will not lower rates any time this year and that expectation has to be delayed to 2024, which may subdue any market rallies in the coming weeks.

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

MANUFACTURING AND MINING UP:  In January, manufacturing output in the U.S. increased by 1.0% and mining output increased by 2.0%, solid growth numbers.

CRACK IN CONSUMER CREDIT PERFORMANCE:  At the end of 2022, 9.3% of auto loans extended to people with low credit scores were 30 or more days behind on payments.  That is the highest that number has been since 2010.  This is occurring at a time when jobs remain plentiful and wage growth is solid.  But car prices inflated post-pandemic, and car buyers on the fringes are having an increasingly difficult time keeping up.  If the labor market loosens up at all in 2023, these car owners may come under additional stress.

INTERNATIONAL MONETARY FUND INFLATION PREDICTIONS:  According to the International Monetary Fund, by the end of this year, inflation in the U.S. will be 3.5%.  That is among the lowest in the world.  The IMF predicts China, Japan, and Taiwan will come in lower.  Most of Europe registers higher in the IMF forecasts with France coming in at 4.6% and the U.K. at 9%.  Zimbabwe is in the midst of runaway triple digit inflation.

MORE EGG NEWS:  Eggs have been in the news due to major inflation for the ones that come from chickens.  Last week, a man in the U.K. stole 200,000 chocolate Easter eggs worth about $38,000.  He must not have been a good thief because he was caught right away and the eggs will be available for the Easter rush.  It was the local district attorney’s first confection conviction.  

STONECROP WEALTH ADVISORS CORPORATE VIRTUES:  Stonecrop Wealth Advisors has adopted the following five corporate virtues:

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

In the last couple of weeks, I discussed how we define and think about Servanthood and Curiosity.  The next is Calmness.  This virtue is defined as, “A state of tranquility or peace; typically, free from agitation, excitement, or anxiety.”  In my opinion, this is an absolute necessity in our line of work.  The markets and the economy and the geopolitical news and people’s reactions to all of these can create challenging situations.  We strongly believe in a philosophy of successful financial planning and investment management that requires calm, calculated, patient, and wise decision-making in the midst of storms. I am surrounded every day at Stonecrop by people who exude this virtue which helps our clients get through some very anxious times on the way to a more prosperous future.

LONG SLOG: I am getting ready for another marathon.  I loved the last one I did (in Italy!), but I didn’t love how slow I was.  I’m trying to do a little better this time, and I’m just over a month away, so this weekend was the 20-miler.  That’s a lot of steps!

NO THANK YOU:  I am not originally from the Philadelphia/Delaware area.  I have been here quite a long time, but I’m still a transplant.  Do you want proof?  Here it is.  I have never yet tried this stuff:

Have a great week!

“The strength or weakness of a society depends more on the level of its spiritual life than on its level of industrialization.  Neither a market economy nor even a general abundance constitutes the crowning achievement of human life.  If a nation’s spiritual energies have been exhausted, it will not be saved from collapse by the most perfect government structure or by any industrial development.  A tree with a rotten core cannot be saved.”  Aleksandr Solzhenitsyn

“Everyone should be quick to listen, slow to speak and slow to become angry.”  James 1:19 (NIV)

SOURCES:
MORE EGG NEWS:  apnews.com/article/crime-theft-28df50cb8959672088ccfe383bd10efd
JUMP IN RETAIL SALES:  census.gov/retail/sales.html
INFLATION MIXED BAG: theovershoot.co/p/soft-landing-more-like-no-landing
MANUFACTURING AND MINING UP: federalreserve.gov/releases/g17/Current/default.htm
CRACK IN CONSUMER CREDIT PERFORMANCE: wsj.com/articles/more-auto-payments-are-late-exposing-cracks-in-consumer-credit-3cbc2382?mod=economy_lead_pos1
INTERNATIONAL MONETARY FUND INFLATION PREDICTIONS: https://www.visualcapitalist.com/mapped-2023-inflation-forecasts-by-country/

(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.