There is a complicated tangle of economic pressures that has converged on the U.S. market as the year comes to an end. Billionaires are rapidly moving into the political arena, not just as funders, but as key players and influencers. The data find they are 4,000 times more likely to be elected to public office than your average citizen. At the same time, the credit landscape is changing, as interest rates broadly are turning. Mortgage rates have recently dropped to their lowest point in over three years. Inflation remains the largest worry. After wholesale prices surprised on the upside in November and retail sales came in hotter than expected,
In December, the U.S. economy created only 50,000 jobs. This will go down as one of the worst years for job growth in generations. Job-finding expectations just dove to an all-time low, per a newly released New York Federal Reserve Survey. Although these issues, inflation remained pinned at 2.7% in December, which adds up to more strain on American consumers. The Federal Reserve indicates it is not likely to lower interest rates in the near future. This hawkish lilt to monetary policy arrives just as we’re receiving mixed economic signals.
Throughout U.S. history, billionaires and billionaire interests have exercised exorbitant influence on U.S. politics, frequently deploying their resources to muscularly establish foothold and influence in public office. This troubling trend begs the question of who is able to run for office as the economic divide grows. With such a significant likelihood of billionaires holding office, their decisions could shape policies that affect various sectors, including housing and job creation.
On the economic side, mortgage rates have dropped significantly to the lowest point in more than three years. This is welcome news to homebuyers who have suffered through the past few years, but it comes amid an ongoing inflation crisis. As we discussed last month, wholesale inflation numbers showed that prices were still higher than expected, adding a layer of uncertainty to the overall economic picture.
Even in the face of these inflationary pressures though, retail sales for November came in higher than anticipated showing that consumer spending remains strong. Filling holiday shopping and pent-up consumer demand played a role in all of this increase. All of those drivers jumped up as the economy came roaring back from the pandemic. Yet ongoing mixed signals between strong job growth and persistent inflation point to still-cautious consumers.
Add it all up and the labor market crashed in December—only 50,000 jobs added. That still meant one of the weakest years for job gains we’ve seen, outside of the pandemic, in decades. Even more concerning, expectations about job-finding sit at all-time lows as reported in a recent New York Fed survey. Her sentiment is a necessary alarm, representing a larger feeling of unease from workers about their jobs in the face of an increasingly unpredictable economic future.
Inflation continues to be a tremendously important issue for millions of Americans, with the consumer price index still at 2.7% as of December. Increased high prices still put pressure on the cost of living for households, likely affecting attitudes about consumer confidence and curbing spending. As the Federal Reserve maintains its current course without immediate interest rate cuts, many Americans may find it challenging to manage rising costs.
The U.S. market consists of more than 10,000 stocks that investors can easily and actively purchase, hold, and sell each business day. Volatility in stock returns can sometimes be misleading due to a handful of large firms that drive aggregate market performance. As a case in point, an example of a 20-day stock return outpacing bonds serves as a reminder that stocks involve more risk than bonds. Investors will have to steel themselves to these complications as they consider their portfolios and their strategies in the broader marketplace.
Another way to judge market momentum is if the S&P 500 index goes and remains above its moving average. That average is over the last 125 trading days. This composite metric acts as an early indicator of all things bullish market sentiment, speaking volumes to the psychology of investors. The index works with seven underlying market indicators to find out which emotions are currently leading market activity.