Dogwood Wealth Management | Weekly Newsletter (Week Ending 12/23/22)Investing
Week In Review
Fresh data from the National Association of Realtors illustrates how the housing market has been crushed this year as existing home sales declined yet again for a 10th straight month. The NAR has been keeping track and publishing this data for over 20 years, and says this is the longest streak of monthly declining sales on record. The chart below shows the federal funds rate (blue; the interest rate controlled by the Fed), the 30-year mortgage rate (yellow; controlled by the market but influenced by the Fed), and existing home sales (purple).
The Fed's preferred measurement of inflation, the personal-consumption expenditures price index, rose slightly last month by 0.1%, a similar result to what we saw from the CPI report a couple weeks ago. This adds to a pile of data showing that inflation, and the economy, continues to cool from the rapid acceleration we saw in the first half of 2022. For example, the PCE is up by 5.5% over the last year. However, if you're looking for where that number may be trending, you could look at the last 6 months, and get an annualized figure closer to 4%. If you examine just the last 3 months of data, the annualized figure is closer to 3%. The CPI data shows similar results.
We are continuing to see this battle between the bullish case and the bearish case for stocks. On the one hand, the market has been given plenty of evidence to show the Fed is successfully reigning in inflation from the peak we saw this summer. On the other hand, the fears of a hard landing, the scenario in which we ultimately wind up in a recession due to the Fed's aggressive rate hikes, appear to be growing.
The S&P 500 finished the week down 0.2% in a choppy week. We've had 3 weeks in a row of weekly losses in the S&P 500. The index is down almost 6% in December, and down 19% for the year. With just 4 trading days remaining in 2022, it looks like instead of a Santa Clause rally, we're being served something more reminiscent of the Marley brothers visiting Scrooge.
What We're Reading
- What Kind of Landing Are We Going to Get? - Ben Carlson
- Wells Fargo to Pay Record CFPB Fine - WSJ