Dogwood Wealth Management | Weekly Newsletter (Week Ending 12/30/22)Investing
Week Year In Review
There wasn't a whole lot to talk about this past week in economic news as we were sandwiched between two major holidays. Since we don't have a lot to review from last week, let's instead highlight a few of the major stories in the economy this year. I'll take you back to New Year's Eve 2021.
- The 30 year mortgage rate was 3.1% (now at 6.4%). That rate would be above 7% by the end of October.
- Gas prices were roughly the same as they are now, although they rose by more than 50% from January to June.
- President Biden was warning Vladimir Putin that if Russia invaded Ukraine, they would face strong economic measures. Russia would invade Ukraine on February 24.
- Inflation was about 7% (currently 7.1%). This rate would continue to increase to more than 9% by June.
- The federal funds rate was at 0% (currently 4.25%). A few months later, the Fed would announce a 0.25% rate increase. This was the beginning of the most aggressive rate hike cycle since the 1980's.
Inflation was on the top of everyone's minds throughout the majority of 2022, and it's likely to remain a headline in the new year. Accompanying that will be talks of the risk of a recession as the Fed has effectively pulled the emergency brake. Will we see the labor market finally give way in 2023? For all the Fed has done to slow the economy, both the unemployment rate and the labor force participation rate have remained relatively unchanged (the unemployment rate is actually lower now than at the beginning of the year, and the labor force participation rate is slightly higher).
The S&P 500 was down slightly this year by 0.1% in the final trading days of 2022. We finished the year down by 19.4%. The S&P 500 set one new record high this past year, on the very first trading day of 2022. From there, it was (mostly) all down hill. Let's go back to that day with this tweet:
The S&P 500 began the year 4766, and finished at 3839. The point isn't to put these companies and their analysts on blast, but to highlight how difficult forecasting the stock market is.
So long, 2022. Hello, 2023.