2023 started off on a positive note as the S&P 500 finished the week up 1.47% following a number of economic reports that signaled the economy and inflation may be slowing, potentially resulting in the Federal Reserve slowing or even pausing its interest rate hikes. These economic reports helped increase sentiment that the economy may be able to conduct a soft landing.
The December jobs report threaded the needle perfectly as nonfarm payrolls increased by 223,000 in December and the unemployment rate fell to 3.5%. Furthermore, the job growth was accompanied by slowing wage growth (0.3% in December) which was music to investor’s ears as the Federal Reserve has pointed to the importance of cooling wage growth in order to tame inflation resulting in a slowdown in interest rate hikes. Additionally, services and manufacturing data, measured by the Institute for Supply Management, fell to contraction territory. While the slowdown in activity is bad news for the economy, it also signaled that the Federal Reserve may have to slow its interest rate hikes further.
A Wealth of Insight from 6,237 Feet 