The first half of January has been a welcome break from the losses of 2022, with the Dow Jones Industrial Average (Dow), Standard and Poor’s 500 Index (S&P 500), and NASDAQ Composite Index (NASDAQ) all ending the period with substantial gains.
Spurring market returns was the same old story: bad news for the economy (or in this case for the workforce) spells good news for the markets. A January 6th report showed a slowdown in wage growth for workers, which could potentially ease inflation. Markets rallied on the news.
Inflation also appears to be dropping. December inflation rates came in at 6.5%, which was in line with economists’ expectations. That is also the lowest inflation rate since October 2021.1
The slowing wage growth and dropping inflation rates are stoking hopes that the Fed will ease up on their interest rate increases. The next meeting of the Fed is scheduled for the end of this month and the market is expecting a modest rate increase, perhaps just 0.25%.
Among positive news is the labor market, which continues to show strength. December 2022 data showed the addition of 223,000 new jobs. Job growth followed a blistering pace for the calendar year 2022, with 4.5 million jobs created, the second highest total on record (2021 numbers were highest on record with 6.7 million jobs added.)2
Reviewing returns for the first half of January, all the major markets posted gains. As of January 13th, the Dow rose 1,155 points (3.48%), the S&P 500 gained 159 points (4.15%) and the NASDAQ increased by 617 points (5.9%).
1, www.jhinvestments.org “Weekly Market Recap” January 13, 2023
2, www.jhinvestments.org “Weekly Market Recap” January 6, 2023
The views and opinions expressed herein are those of the author(s) noted and may or may not represent the views of Capital Analysts or Lincoln Investment. The material presented is provided for informational purposes only. Past performance is no guarantee of future results. No person or system can predict the market. There is no guarantee that any strategies discussed will result in a positive outcome. All investing involves risk and no investment strategy can guarantee a profit or protect against loss, including the potential loss of principal. S&P 500 Index is an index of 500 of the largest exchange-traded stocks in the US from a broad range of industries whose collective performance mirrors the overall stock market. The NASDAQ is an index that tracks the cumulative results on a market capitalization basis of all stocks trading in the NASDAQ system. The Dow Jones Industrial Average is a widely watched index of 30 American stocks thought to represent the pulse of the American economy and markets. Investors cannot invest directly in an index. Diversification does not guarantee a profit or protect against a loss.