Stocks rallied last week thanks to fresh confirmation of inflation’s cooling trend and growing optimism that an inflation slowdown may provide the Fed with space to ease up on future rate hikes.

The Dow Jones Industrial Average gained 2.00%, while the Standard & Poor’s 500 advanced 2.67%. The Nasdaq Composite index surged 4.82% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, jumped 3.32%.^1,2,3

Mixed Economic Data

Stocks weakened to start the week amid discouraging corporate earnings and troubling economic data. Disappointing retail sales and manufacturing reports sparked concerns that the Fed may have gone too far in hiking rates, while a drop in initial jobless claims diminished chances of a near-term pause in rate hikes. Welcome news from two big technology names on Friday powered a strong rally that mixed significant indices.

The start of the earnings season was a drag on investor sentiment. While 69% of the S&P 500 constituent companies that reported earnings by Thursday (48 companies) exceeded expectations, the percentage of “beats” is below the three-year average. More concerning, however, was that average earnings declined by more than 2%.⁴

Consumers Retrench  

Retail sales fell 1.1% in December, capping an overall weak holiday shopping season. November retail sales were revised downward to -1.0%, from the earlier estimate of -0.6%. Compared to November-December 2021, sales increased by 5.3%, below the 6 to 8% increase expected by The National Retail Federation.^5,6

Many economists viewed these lackluster numbers as evidence of a weakening consumer. A more cautious consumer raises more concerns about a recession at some point this year since the primary driver of U.S. economic growth is consumer spending.

This Week: Key Economic Data

Tuesday: Purchasing Managers’ Index Composite.

Thurday: Gross Domestic Product (GDP). Durable Goods Orders. New Home Sales. Jobless Claims.

Friday: Consumer Sentiment.

^{Source: Econoday, January 20, 2023
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.}

This Week: Companies Reporting Earnings

Tuesday: Microsoft Corporation (MSFT), General Electric Company (GE), Verizon Communications, Inc. (VZ), Johnson & Johnson (JNJ), Lockheed Martin Corporation (LMT), Texas Instruments, Inc. (TXN), Union Pacific Corporation (UNP), D.R. Horton, Inc. (DHI), Raytheon Technologies Corporation (RTX).

Wednesday: AT&T, Inc. (T), The Boeing Company (BA), Tesla, Inc. (TSLA), International Business Machines Corporation (IBM), Lam Research Corporation (LRCX), Abbott Laboratories (ABT), CSX Corporation (CSX), NextEra Energy, Inc. (NEE), KimberlyClark Corporation (KMB), Norfolk Southern Corporation (NSC), General Dynamics (GD).

Thursday: Intel Corporation (INTL), Visa, Inc. (V), Mastercard, Inc. (MA), Blackstone, Inc. (BX), Northrop Grumman Corporation (NOC), Southwest Airlines Co. (LUV), Rockwell Automation, Inc. (ROK).

Friday: Chevron Corporation(CVX), HCA Healthcare, Inc. (HCA), American Express Company (AXP), ColgatePalmolive Company (CL).

^{Source: Zacks, January 20, 2023}

“Writing is thinking on paper.”
– William Zinsser

​

Beware Of Improper Employee Retention Credit Claim

The employee retention credit (ERC) is a refundable tax credit for businesses that continued paying employees while shut down due to the COVID-19 pandemic or had significant declines in gross receipts from March 13, 2020–December 31, 2021. While this tax credit can be a great benefit for employers, there have been third parties promoting improper ERC claims.

Employers should be wary of third parties advising them to claim the employee retention credit when they may not qualify. These third parties often charge hefty upfront fees or a fee contingent on the refund amount.

There are several conditions employers must meet to be eligible for an ERC. If you know of any improper ERC claims, submit Form 3949-A, Information Referral, to the IRS.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov⁷

What Is Dry Brushing?

Let’s face it: the cold winter weather is not friendly to our skin. If you’re struggling with dry, unhappy skin this winter, consider dry brushing!

Dry brushing involves taking a specialized brush and rubbing it on your skin. You can use a dry brush throughout most areas of your body, and the goal is to gently exfoliate your skin to get rid of dry, flakey skin and encourage blood flow. Dry brushing is a favorite skincare routine year-round, but it can be especially beneficial in the winter when your skin might be extra dry.

When dry brushing, make sure to use an appropriate brush and do it gently so as not to cause damage to your skin. Talk to your dermatologist before starting dry brushing if you have sensitive skin. 

Tip adapted from TODAY. com⁸

Take one letter out of a 7-letter word and it becomes longer. What is this word?

Last week’s riddle: You need to take a gallon of oil out of a barrel of oil. How can you do it using only a 3-gallon container and a 5-gallon container? Answer: Fill the 3-gallon container with oil and pour it into the 5-gallon container. Then fill the 3-gallon container again and use it to fill the 5-gallon container the rest of the way. One gallon will be left in the 3-gallon container.

​

St. Johns Suspension Bridge, Portland, Oregon 

Footnotes And Sources

<sup>1. The Wall Street Journal, January 20, 2023
2. The Wall Street Journal, January 20, 2023
3. The Wall Street Journal, January 20, 2023
4. The Earnings Scout, January 19, 2023
5. Census.gov, January 18, 2023
6. The Wall Street Journal, January 18, 2023
7. IRS.gov, November 7, 2022
8. TODAY, January 31, 2015</sup>

Stocks rallied last week thanks to fresh confirmation of inflation’s cooling trend and growing optimism that an inflation slowdown may provide the Fed with space to ease up on future rate hikes.

The Dow Jones Industrial Average gained 2.00%, while the Standard & Poor’s 500 advanced 2.67%. The Nasdaq Composite index surged 4.82% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, jumped 3.32%.^1,2,3

Improving Sentiment

Investor sentiment came into the new year weighed down by recession fears and concerns that Fed rate hikes may “go higher for longer.” Last week a different narrative emerged. Sustained declines in inflation, a rate hike cycle nearing an end, and a resilient economy that may avoid recession resulted in a broad-based rally.

Moderating inflation was evident in the Consumer Price Index (CPI) report released on Thursday, which, in combination with a strong labor report the previous Friday, gave investors confidence that the environment for stocks had improved. Stocks extended their gains to end the week as a few money center banks kicked off a new earnings season with upbeat reports.

Inflation’s Cooling Trend

December’s CPI report showed a 0.1% decline in prices from November and a 6.5% increase from a year ago. It was the sixth-consecutive month of decelerating year-over-year increases. Core prices (excludes food and energy) slowed to 5.7%, a decline from the previous month’s 6.0% year-over-year rise. For the last three months, core prices have risen at an annualized rate of 3.1%–the slowest pace in over a year.⁴

Falling gasoline prices (-9.4%) accounted for most of the monthly decline in the CPI. Used car prices (-2.5%) were another bright spot.⁵

This Week: Key Economic Data

Wednesday: Producer Price Index (PPI). Retail Sales. Industrial Production.

Thursday: Housing Starts. Jobless Claims.

Friday: Existing Home Sales.

^{Source: Econoday, January 13, 2023
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.}

This Week: Companies Reporting Earnings

Tuesday:  The Goldman Sachs Group, Inc. (GS), Morgan Stanley (MS), The Charles Schwab Corporation (SCHW).

Wednesday: United Airlines Holdings, Inc. (UAL), The PNC Financial Services Group, Inc. (PNC), Prologis, Inc. (PLD).

Thursday: Netflix, Inc. (NFLX), The Procter & Gamble Company (PG). 

Friday: Schlumberger Limited (SLB), PPG Industries, Inc. (PPG).

^{Source: Zacks, January 13, 2023}

“I didn’t know that I was different and now I realize how very different I was. But difference is what makes the world beautiful.”
– Venus Williams

​

Tax Benefits for Charitable Giving

Giving back to others feels good and is a great way to support your community and those in need, but it also has tax advantages. According to the IRS, most charitable contributions are deductible as an itemized deduction when you file your taxes, including cash and property contributions.

Some contributions aren’t tax-deductible, so check the current tax law or talk to your account before deducting charitable gifts from your tax return. You can even use the Interactive Tax Assistant on the IRS website to see if your charitable contribution is deductible.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov⁶

Goals That Stick

Remember, your goals should be specific, measurable, actionable, realistic, and timely. Here are some to get you started:

• Eat more whole foods (set a particular number based on your lifestyle).
• Drink more water (put a specific number of ounces you want to hit).
• Sit less and move more (ex: standing up once per hour for 12 hours).
• Go for a 15-minute walk every day.
• Get at least 7 hours of sleep.

We’d love to know: what goals are you setting this winter?

Tip adapted from Healthline⁷

You need to take a gallon of oil out of a barrel of oil. How can you do it using only a 3-gallon container and a 5-gallon container?

Last week’s riddle: It is a short and simple word, and something that everyone needs. Put an ‘r’ on the end and you have a new friend, but if the first letter goes away, you are sad. What is this word? Answer: Love.

​

Crooked River, Smith Rock State Park, Oregon

Footnotes and Sources

<sup>1. The Wall Street Journal, January 13, 2023
2. The Wall Street Journal, January 13, 2023
3. The Wall Street Journal, January 13, 2023
4. The Wall Street Journal, January 12, 2023
5. CNBC, January 12, 2023
6. IRS.gov, November 15, 2022
7. Healthline, December 23, 2019</sup>

What a year!  

In some ways, it feels as though we lived through several years in 2022. The onslaught of events included, “The first major European war since the 1990s, unprecedented sanctions, energy-price mayhem, bail-outs, global interest rates rising at their fastest pace in four decades, a faltering Chinese economy, an overheating American one, housing markets looking peaky across the rich world, [and] a crypto blow-up for the ages…,” reported Hamish Birrell in The Economist’s Money Talks newsletter.

The impact of these events was felt around the world. Global inflation averaged 10 percent, and global stock markets were down about 20 percent through November, reported The Economist. Yet, some countries showed remarkable economic resilience, performing far better than average. The Economist surveyed economic and financial data from 34 wealthy countries. The data included gross domestic product or GDP (which is the value of all goods and services produced in a nation), inflation, breadth of inflation, stock market performance and government debt.

Many of the top performers were in the Mediterranean. They tended to have better-than-average stock market performance, declining debt-to-GDP ratios*, strong economic growth, and/or below average inflation. The top 10 included:

• Greece
• Portugal
• Ireland
• Israel
• Spain
• Mexico
• Canada
• Japan
• France
• Italy

The United States ranked 20^th, although its position may have skewed low. The author opined, “America’s GDP numbers are misleadingly weak: in recent quarters official statisticians have struggled to account for the impact of enormous stimulus packages.”

 Last week, major U.S. stock indices delivered mixed results as economic data, created uncertainty reported Nicholas Jasinski of Barron’s. Positive earnings news and strong labor market data were countered by cooling inflation and slower consumer spending. The Standard & Poor’s 500 Index and the Nasdaq Composite moved lower, and the Dow Jones Industrial Average rose. Treasury bond yields generally moved higher.

OUT WITH THE OLD. IN WITH THE NEW. Every new year brings new ways of doing things. Here are some of the trends and ideas that may shape 2023 (or not).

Challenging your taste buds. “Flavors that violate [consumers’] expectations are sure to be a hit…unexpected and unique flavor combinations will be in demand going into 2023.” Spoiler alert. If you want to be surprised by 2023’s new flavors stop reading here. If you want to warn your tongue what may be coming, prepare for dragon fruit and Vietnamese-Cajun.

Traveling for inner growth. One of the top travel trends in 2023 will be transformation retreats, according to Sarah Allard of Condé Nast Traveler. “…2023 will be the year we travel for personal betterment. Whether you are seeking to overcome grief, identify your life’s mission, or discover what your body is physically capable of, there will be a transformation retreat that caters to it.” Another anticipated trend is “set-jetting,” visiting countries where your favorite movies and television shows are filmed.

Dowsing for fresh water. 2023 may be the year that water-strapped cities and regions begin harvesting water vapor. That’s the suggestion offered by scientists at the University of Illinois at Urbana-Champaign who have been researching sources of fresh water. “A new study suggests an investment in new infrastructure capable of harvesting oceanic water vapor as a solution to limited supplies of fresh water in various locations around the world,” reported Science Daily.

And now for something completely different. If you’re bored with your current exercise routine, you might consider the Ministry of Silly Walks workout. A tongue-in-cheek study published in the British Medical Journal found that inefficient walking (of the type seen in Monty Python’s Ministry of Silly Walks skit) burns lots of calories. “Adults could achieve 75 minutes of vigorous intensity physical activity per week by walking inefficiently for about 11 min/day. Had an initiative to promote inefficient movement been adopted in the early 1970s, we might now be living among a healthier society.”

We hope you have a safe and happy New Year celebration.

Weekly Focus – Think About It
“Write it on your heart that every day is the best day in the year.”
—Ralph Waldo Emerson, philosopher

Investment advice offered through Research Financial Strategies, a registered investment advisor.
* This newsletter and commentary expressed should not be construed as investment advice.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject.

Investment advice offered through Research Financial Strategies, a registered investment advisor.

Sources:

https://www.economist.com/newsletters [Money Talks newsletter] (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/12-27-22_The%20Economist_We%20Look%20at%20the%20Bright%20Side%20of%202022_1.pdf)
https://www.economist.com/finance-and-economics/2022/12/18/2022s-unlikely-economic-winners (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/12-27-22_The%20Economist_2022s%20Unlikely%20Economic%20Winners_2.pdf)
https://www.barrons.com/articles/stocks-limp-toward-2023-as-the-data-show-few-signs-of-a-clear-direction-51671841571?refsec=the-trader&mod=topics_the-trader (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/12-27-22_Barrons_Stocks%20Limp%20Toward%202023_3.pdf)
https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202212
https://corporatefinanceinstitute.com/resources/economics/debt-to-gdp-ratio/
https://elibrary.worldbank.org/doi/abs/10.1596/1813-9450-5391
https://www.foodbusinessnews.net/articles/22886-flavors-to-watch-in-2023
https://www.cntraveler.com/story/17-travel-trends-youll-see-in-2023
https://www.sciencedaily.com/releases/2022/12/221206083115.htm
https://www.bmj.com/content/379/bmj-2022-072833
https://www.brainyquote.com/topics/new-years-quotes

Hawkish comments by the Fed and weak economic data heightened investors’ recession concerns and sent stocks lower last week.

The Dow Jones Industrial Average lost 1.66%, while the Standard & Poor’s 500 retreated 2.08%. The Nasdaq Composite index declined 2.72% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 0.88%.^1,2,3

Stocks Under Pressure

Stocks began the week on a positive note, supported by a cooler-than-expected Consumer Price Index (CPI) report. Stocks reversed direction mid-week, however, following the Federal Open Market Committee (FOMC) meeting in which another 0.5% rate hike was announced.

The half-point increase was widely anticipated, but the increase in the terminal rate (i.e., the point at which the Fed stops raising rates) rattled investors. Continued hawkishness by Fed Chair Powell at the post-meeting press conference added to investors’ anxiety. The potential for higher rates for longer, along with disappointing economic data, particularly a sharp decline in retail sales, amplified fears of a recession and sent stocks lower for the remainder of the week.

Inflation And The Fed

The release of November’s CPI showed inflation cooling for the second consecutive month, as prices rose just 0.1% month-over-month and 7.1% from a year ago. Both were better than expected.⁴

The FOMC ended its last meeting of 2022 by raising interest rates another 0.5% and signaling that it would likely continue to hike rates into the new year. At a subsequent press conference, Fed Chair Powell commented that the next rate increase could be a quarter-percentage point. Most FOMC members appear to support raising the terminal rate (the point at which hikes end) to above 5%, up from its September projection of 4.6%.⁵  

This Week: Key Economic Data

Tuesday: Housing Starts.

Wednesday: Consumer Confidence. Existing Home Sales.

Thursday: Jobless Claims. Gross Domestic Product (GDP). Index of Leading Economic Indicators.

Friday: New Home Sales. Durable Goods Orders. Consumer Sentiment.

^{Source: Econoday, December 16, 2022
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.}

This Week: Companies Reporting Earnings

Tuesday: FedEx Corporation (FDX), Nike, Inc. (NKE), General Mills, Inc. (GIS).

Wednesday: Micron Technology, Inc. (MU).

^{Source: Zacks, December 16, 2022
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.}

“Love is the master key that opens the gates of happiness.”
– Oliver Wendell Holmes

​

How To Start Journaling

Journaling has many potential benefits, from increased focus to more detailed goal-setting. Want to pick up the habit of journaling but need help figuring out where to start? Here are some tangible tips to get you started:

• Start small. Sometimes, the idea of starting a whole new journal can be overwhelming. Start by writing just one prompt or setting a timer for 2 minutes.

• Pick the simplest tools, and pick tools you love. You’re more likely to enjoy journaling if you enjoy the journal and pen themselves!

• Depending on your journaling style, you can either start with a prompt or start with free writing. Free writing is the act of writing whatever comes to mind.

• Let it all out and write without censoring yourself. One tip: try writing as fast as possible, so you don’t have time to edit!

Tip adapted from Healthline⁷

Name the three English-language three-letter words that begin and end with the letter E.

Last week’s riddle: What item binds two people yet touches only one? Answer: A wedding ring.

​

Chiyoda City, Tokyo, Japan

Footnotes and Sources

<sup>1. The Wall Street Journal, December 16, 2022
2. The Wall Street Journal, December 16, 2022
3. The Wall Street Journal, December 16, 2022
4. CNBC, December 13, 2022
5. The Wall Street Journal, December 14, 2022
6. IRS.gov, August 8, 2022
7. Healthline, February 22, 2022</sup>