Numbers & “Heat Map”

Posted on March 21, 2023 by The Weekly Commentary

Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five- and 10- year returns are annualized excluding dividends. Interest Rates: Federal Reserve, Mortgage Bankers Association.

MARKET HEAT MAP

The health of the U.S. economy is a key driver of long-term returns in the stock market. Below, we grade key economic conditions that we believe are of particular importance to investors.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

The Numbers & “Heat Map”

Posted on March 13, 2023 by The Weekly Commentary

THE NUMBERS

The Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association.

MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.

US ECONOMY
CONSUMER HEALTH	NEUTRAL	Real gross domestic product (GDP) increased at an annual rate of 2.9 percent in the fourth quarter of 2022 after increasing by 3.2 percent in the third quarter. The increase in the fourth quarter primarily reflected increases in inventory investment and consumer spending that were partly offset by a decrease in housing investment.
CORPORATE EARNINGS	NEUTRAL	The earnings growth rate for Q4 2022 was -4.6%. In Q4, 68% of companies beat EPS estimates and 66% beat revenue expectations. For Q1 2023, earnings are expected to decline further at a rate of – 6.1%. The forward 12-month P/E ratio for the S&P 500 is now 17.2 – below the 5-year and 10-year averages of 18.5 and 17.3, respectively.
EMPLOYMENT	POSITIVE	U.S. Nonfarm Payrolls for January 2023 increased by 311,000, and the unemployment rate hedged up to 3.6% from 3.4%. Leisure and hospitality, retail trade, government, and health care were among the sectors with the most notable gains. Employment declined in information, transportation, and warehousing.
INFLATION	NEGATIVE	The annual inflation rate in the U.S. increased by 6.4% for January 2023 compared to the December 2022 reading of 6.5%. This is the lowest CPI value since October 2021. Core CPI increased at a rate of 5.6% versus 5.7% in December. The primary contributors to the increase in inflation were shelter, food, gasoline, and natural gas. On the other hand, indexes for used vehicles, medical care, and airline fares decreased over the month.
FISCAL POLICY	NEUTRAL	A few weeks after taking control of the chamber, GOP lawmakers are pushing for austerity measures in hopes of improving the nation’s fiscal health. Democrats have responded with harsh criticism and stressed that they would not negotiate a deal with Republicans involving reductions of benefits. Meanwhile, the latest CBO projections show that rising interest rates and spending bills are adding to deficits as the U.S. is on track to add $19 trillion of new debt over the nextdecade.
MONETARY POLICY	NEGATIVE	Earlier this month, the Fed approved a 25 bps rate hike taking its target range to 4.50%-4.75%. Although the magnitude of rate hikes has decreased, rates will likely be kept higher through 2023 with no reductions until 2024. The FOMC has also reiterated its commitment to return inflation to its 2% objective. The next Fed meeting is scheduled for March 21st and 22nd.
GLOBAL CONSIDERATIONS
GEOPOLITICAL RISKS	NEGATIVE	While the Russian-Ukraine conflict does not show signs of abating, additional geopolitical issues have arisen between the U.S. and China, as well as between the U.K. and the E.U. Secretary of State Blinken’s trip to China was canceled in the wake of the incidents involving Chinese spy balloons, which lead U.S. – China relations to deteriorate further. The U.K. and E.U. are involved in negotiation conflicts over tariffs and freedom of trade.

ECONOMIC RISKS

NEUTRAL

Although the aforementioned geopolitical risks remain prevalent in the daily news, their effects on the global economy seem to have subsided. On the other hand, domestic economic risks have increased over the past week with the collapse of Silicon Valley Bank, which also brought down Signature Bank, another tech-central bank. The ripple effects of these failures seem to have been contained for now. However, the tech start-up industry will face headwinds until a replacement funding institution is found.

The Numbers & “Heat Map”

Posted on March 7, 2023 by The Weekly Commentary

THE NUMBERS

US ECONOMY
CONSUMER HEALTH	NEUTRAL	Real gross domestic product (GDP) increased at an annual rate of 2.9 percent in the fourth quarter of 2022 after increasing by 3.2 percent in the third quarter. The increase in the fourth quarter primarily reflected increases in inventory investment and consumer spending that were partly offset by a decrease in housing investment.
CORPORATE EARNINGS	NEUTRAL	The earnings growth rate for Q3 2022 was 2.4%. With 99% of S&P500 companies reporting actual results, the blended earnings decline was -4.6%. This is the first negative growth rate since Q3 2020 (-5.7%). Overall, 68% of companies beat EPS estimates and 66% beat revenue expectations.
EMPLOYMENT	POSITIVE	U.S. Nonfarm Payrolls for January 2023 increased by 517,000, almost three times the expected number of 187,000. The unemployment rate fell to 3.4% from 3.5% and is now the lowest in 50 years. Leisure and hospitality, health care, professional services, and government were among the sectors with the most notable gains.
INFLATION	NEGATIVE	The annual inflation rate in the U.S. increased by 6.4% for January 2023 compared to the December 2022 reading of 6.5%. This is the lowest CPI value since October 2021. Core CPI increased at a rate of 5.6% versus 5.7% in December. The primary contributors to the increase in inflation were shelter, food, gasoline, and natural gas. On the other hand, indexes for used vehicles, medical care, and airline fares decreased over the month.
FISCAL POLICY	NEUTRAL	A few weeks after taking control of the chamber, GOP lawmakers are pushing for austerity measures in hopes of improving the nation’s fiscal health. Democrats have responded with harsh criticism and stressed that they would not negotiate a deal with Republicans involving reductions of benefits. Meanwhile, the latest CBO projections show that rising interest rates and spending bills are adding to deficits as the U.S. is on track to add $19 trillion of new debt over the nextdecade.
MONETARY POLICY	NEGATIVE	Earlier this month, the Fed approved a 25 bps rate hike taking its target range to 4.50%-4.75%. Although the magnitude of rate hikes has decreased, rates will likely be kept higher through 2023 with no reductions until 2024. The FOMC has also reiterated its strong commitment to return inflation to its 2% objective. The next Fed meeting is scheduled for March 21st and 22nd.
GLOBAL CONSIDERATIONS
GEOPOLITICAL RISKS	NEGATIVE	While the Russian-Ukraine conflict does not show signs of abating, additional geopolitical issues have arisen between the U.S. and China and between the U.K. and the E.U. Secretary of State Blinken’s trip to China was canceled in the wake of the incidents involving Chinese spy balloons, which lead US-China relations to deteriorate further. The U.K. and E.U. are involved in negotiation conflicts over tariffs and freedom of trade.

ECONOMIC RISKS

NEUTRAL

Although the aforementioned geopolitical risks remain prevalent in everyday news, their effects on the global economy seem to have subsided. China abandoned its zero-Covid policy, which will have a positive impact on the supply chain and the economy as a whole. The European economy also seems to be healthier than expected, partly due to an unusually warm winter that has provided some relief from increasing energy prices.

The Numbers & “Heat Map”

Posted on February 28, 2023 by The Weekly Commentary

THE NUMBERS

US ECONOMY
CONSUMER HEALTH	NEUTRAL	Real gross domestic product (GDP) increased at an annual rate of 2.9 percent in the fourth quarter of 2022 after rising by 3.2 percent in the third quarter. The increase in the fourth quarter primarily reflected increases in inventory investment and consumer spending that were partly offset by adecrease in housing investment.
CORPORATE EARNINGS	NEUTRAL	The earnings growth rate for Q3 2022 was 2.4%. For Q4 2022, earnings are expected to decline by – 4.8%, down from the previous estimate of -4.7%. This would be the first negative growth since Q3 2020 (-5.7%). So far, 94% of S&P 500 companies have reported actual results — 68% of companies beat EPS estimates and 66% beat revenue expectations.
EMPLOYMENT	POSITIVE	U.S. Nonfarm Payrolls for January 2023 increased by 517,000, almost three times the expected number of 187,000. The unemployment rate fell to 3.4% from 3.5% and is now the lowest in 50 years. Leisure and hospitality, health care, professional services, and government were among the sectors with the most notable gains.
INFLATION	NEGATIVE	The annual inflation rate in the U.S. increased by 6.4% for January 2023 compared to the December 2022 reading of 6.5%. This is the lowest CPI value since October 2021. Core CPI increased at a rate of 5.6% versus 5.7% in December. The primary contributors to the increase in inflation were shelter, food, gasoline, and natural gas. On the other hand, indexes for used vehicles, medical care, and airline fares decreased over the month.
FISCAL POLICY	NEUTRAL	A few weeks after taking control of the chamber, GOP lawmakers are pushing for austerity measures in hopes of improving the nation’s fiscal health. Democrats have responded with harsh criticism and stressed that they would not negotiate a deal with Republicans involving reductions of benefits. Meanwhile, the latest CBO projections show that rising interest rates and spending bills are adding to deficits as the U.S. is on track to add $19 trillion of new debt over the nextdecade.
MONETARY POLICY	NEGATIVE	Earlier this month, the Fed approved a 25 bps rate hike taking its target range to 4.50%-4.75%. Although the magnitude of rate hikes has been decreased, rates are likely to be kept higher through 2023 with no reductions until 2024. The FOMC has also reiterated its strong commitment to return inflation to its 2% objective.
GLOBAL CONSIDERATIONS
GEOPOLITICAL RISKS	NEGATIVE	While the Russian-Ukraine conflict does not show signs of abating, additional geopolitical issues have arisen in South America with the violent protests that hit the capital of Brazil. Following the October 2022 elections won by the left party, Jair Bolsonaro’s far-right supporters stormed Brasilia accusing the winning candidate and party of corruption. Bolsonaro is currently in Florida and has communicated little publicly.

ECONOMIC RISKS

NEUTRAL

Although the afore-mentioned geopolitical risks remain prevalent in everyday news, their effects on the global economy have subsided. China abandoned its zero-Covid policy, which will have a positive impact on the supply chain and the economy as a whole. The European economy also seems to be healthier than expected, partly due to an unusually warm winter that has provided some relief from increasing energy prices.

The Numbers & “Heat Map”

Posted on February 21, 2023 by The Weekly Commentary

THE NUMBERS

US ECONOMY
CONSUMER HEALTH	NEUTRAL	Real gross domestic product (GDP) increased at an annual rate of 2.9 percent in the fourth quarter of 2022 after increasing by 3.2 percent in the third quarter. The increase in the fourth quarter primarily reflected increases in inventory investment and consumer spending that were partly offset by a decrease in housing investment.
CORPORATE EARNINGS	NEUTRAL	The earnings growth rate for Q3 2022 was 2.4%. For Q4 2022, earnings are expected to decline by -4.7%, up from the previous estimate of -4.9%. This would be the first negative growth since Q3 2020 (-5.7%). So far, 82% of S&P 500 companies have reported actual results — 68% of companies beat EPS estimates and 65% beat revenue expectations.
EMPLOYMENT	POSITIVE	U.S. Nonfarm Payrolls for January 2023 increased by 517,000, almost three times the expected number of 187,000. The unemployment rate fell to 3.4% from 3.5% and is now the lowest in 50 years. Leisure and hospitality, health care, professional services, and government were among the sectors with the most notable gains.
INFLATION	NEGATIVE	The annual inflation rate in the U.S. increased by 6.4% for January 2023 compared to the December 2022 reading of 6.5%. This is the lowest CPI value since October 2021. Core CPI increased to 5.6% versus 5.7% in December. The primary contributors to the increase in inflation were shelter, food, gasoline, and natural gas. On the other hand, indexes for used vehicles, medical care, and airline fares decreased over the month.
FISCAL POLICY	NEUTRAL	A few weeks after taking control of the chamber, GOP lawmakers are pushing for austerity measures in hopes of improving the nation’s fiscal health. Democrats have responded with harsh criticism and stressed that they would not negotiate a deal with Republicans involving reductions of benefits. Meanwhile, the latest CBO projections show that rising interest rates and spending bills are adding to deficits as the U.S. is on track to add $19 trillion of new debt over the next decade.
MONETARY POLICY	NEGATIVE	Earlier this month, the Fed approved a 25-bps rate hike taking its target range to 4.50%-4.75%. Although the magnitude of rate hikes has been decreased, rates are likely to be kept higher through 2023 with no reductions until 2024. The FOMC has also reiterated its strong commitment to return inflation to its 2% objective.
GLOBAL CONSIDERATIONS
GEOPOLITICAL RISKS	NEGATIVE	While the Russian-Ukraine conflict does not show signs of abating, additional geopolitical issues have arisen in South America with the violent protests that hit the capital of Brazil. Following the October 2022 elections won by the left party, Jair Bolsonaro’s far-right supporters stormed Brasilia accusing the winning candidate and party of corruption. Bolsonaro is currently in Florida and has communicated little publicly.

ECONOMIC RISKS

NEUTRAL

Although the afore-mentioned geopolitical risks remain prevalent in everyday news, their effects on the global economy seem to have subsided. China abandoned its zero-Covid policy, which will positively impact the supply chain and the economy as a whole. The European economy also appears to be healthier than expected, partly due to an unusually warm winter that has provided some relief on increasing energy prices.

The Numbers & “Heat Map”

Posted on February 14, 2023 by The Weekly Commentary

THE NUMBERS

US ECONOMY
CONSUMER HEALTH	NEUTRAL	Real gross domestic product (GDP) increased at an annual rate of 2.9 percent in the fourth quarter of 2022 after increasing by 3.2 percent in the third quarter. The increase in the fourth quarter primarily reflected increases in inventory investment and consumer spending that were partly offset by a decrease in housing investment.
CORPORATE EARNINGS	NEUTRAL	The earnings growth rate for Q3 2022 was 2.4%. For Q4 2022, earnings are expected to decline by -4.9%, up from the previous estimate of -5.3%. This would be the first negative growth since Q3 2020 (-5.7%). So far, 69% of S&P 500 companies have reported actual results — 69% of companies beat EPS estimates and 63% beat revenue expectations.
EMPLOYMENT	POSITIVE	U.S. Nonfarm Payrolls for January 2023 increased by 517,000, almost three times the expected number of 187,000. The unemployment rate fell to 3.4% from 3.5% and is now the lowest in 50 years. Leisure and hospitality, health care, professional services, and government were among the sectors with the most notable gains.
INFLATION	NEGATIVE	The annual inflation rate in the U.S. increased by 6.5% for December 2022 compared to the November reading of 7.1%. This is the lowest CPI value since October 2021. Core CPI increased at a rate of 5.7% versus 6.0% in November. Most prices fell during the last month of the year, including food, used cars, and most energy sources. Electricity and shelter still saw an increase from the previous month.
FISCAL POLICY	NEUTRAL	A few weeks after taking control of the chamber, GOP lawmakers are pushing for austerity measures in hopes of improving the nation’s fiscal health. The primary areas of focus are federal health care, education, science and labor programs, and Social Security. Democrats have responded with harsh criticism, and President Biden has stressed that he will not negotiate a deal with Republicans involving reductions of benefits.
MONETARY POLICY	NEGATIVE	Two weeks ago, the Fed approved a 25-bps rate hike taking its target range to 4.50%-4.75%. Although the magnitude of rate hikes has been decreased, rates are likely to be kept higher through 2023 with no reductions until 2024. The FOMC has also reiterated its strong commitment to return inflation to its 2% objective.
GLOBAL CONSIDERATIONS
GEOPOLITICAL RISKS	NEGATIVE	While the Russian-Ukraine conflict does not show signs of abating, additional geopolitical issues have arisen in South America with the violent protests that hit the capital of Brazil last week. Following the October 2022 elections won by the left party, Jair Bolsonaro’s far-right supporters stormed Brasilia accusing the winning candidate and party of corruption. Bolsonaro is currently in Florida and has communicated little publicly.

ECONOMIC RISKS

NEUTRAL

Although the afore-mentioned geopolitical risks remain prevalent in everyday news, their effects on the global economy seem to have subsided. China abandoned its zero-Covid policy, which will positively impact the supply chain and the economy as a whole. The European economy also seems to be healthier than expected, partly due to an unusually warm winter that has provided some relief from increasing energy prices.

The Numbers & “Heat Map”

Posted on February 7, 2023 by The Weekly Commentary

THE NUMBERS

US ECONOMY
CONSUMER HEALTH	NEUTRAL	Real gross domestic product (GDP) increased at an annual rate of 2.9 percent in the fourth quarter of 2022 after increasing by 3.2 percent in the third quarter. The increase in the fourth quarter primarily reflected increases in inventory investment and consumer spending that were partly offset by a decrease in housing investment.
CORPORATE EARNINGS	NEUTRAL	The earnings growth rate for Q3 2022 was 2.4%. For Q4 2022, earnings are expected to decline by -5.3%, down from the previous estimate of -5.0%. This would be the first negative growth since Q3 2020 (-5.7%). So far, 50% of S&P 500 companies have reported actual results — 70% of companies beat EPS estimates and 61% beat revenue expectations.
EMPLOYMENT	NEUTRAL	U.S. Nonfarm Payrolls for January 2023 increased by 517,000, almost three times the expected number of 187,000. The unemployment rate fell to 3.4% from 3.5% and is now the lowest in 50 years. Leisure and hospitality, health care, professional services, and government were among the sectors with the most notable gains.
INFLATION	NEGATIVE	The annual inflation rate in the U.S. increased by 6.5% for December 2022 compared to the November reading of 7.1%. This is the lowest CPI value since October 2021. Core CPI increased at a rate of 5.7% versus 6.0% in November. Most prices fell during the last month of the year, including food, used cars, and the majority of energy sources. Electricity and shelter still saw an increase from the previous month.
FISCAL POLICY	NEUTRAL	A few weeks after taking control of the chamber, GOP lawmakers are pushing for austerity measures to improve the nation’s fiscal health. The primary areas of focus are federal health care, education, science and labor programs, and Social Security. Democrats have responded with harsh criticism, and President Biden has stressed that he will not negotiate a deal with Republicans involving reductions of benefits.
MONETARY POLICY	NEGATIVE	Last week the Fed approved a 25-bps rate hike taking its target range to 4.50%-4.75%. Although the magnitude of rate hikes has been decreased, rates are likely to be kept higher through 2023 with no reductions until 2024. The FOMC has also reiterated its strong commitment to return inflation to its 2% objective.
GLOBAL CONSIDERATIONS
GEOPOLITICAL RISKS	NEGATIVE	While the Russian-Ukraine conflict does not show signs of abating, additional geopolitical issues have arisen in South America with the violent protests that hit the capital of Brazil last week. Following the October 2022 elections won by the left party, Jair Bolsonaro’s far-right supporters stormed Brasilia accusing the winning candidate and party of corruption. Bolsonaro is currently in Florida and has communicated little publicly.
ECONOMIC RISKS	NEGATIVE	China seems to have abandoned its zero-Covid policy, which should help the global supply chain recover. Gas supplies from Russia to Europe have decreased by 88% over the past year, and EU countries have agreed to cut gas usage by 15% as gas prices have more than doubled. Nevertheless, an unusually mild winter has helped the majority of Europe dealing with increased energy costs.

The Numbers & “Heat Map”

Posted on January 31, 2023 by The Weekly Commentary

THE NUMBERS

US ECONOMY
CONSUMER HEALTH	NEUTRAL	Real gross domestic product (GDP) increased at an annual rate of 2.9 percent in the fourth quarter of 2022 after increasing by 3.2 percent in the third quarter. The increase in the fourth quarter primarily reflected increases in inventory investment and consumer spending that were partly offset by a decrease in housing investment.
CORPORATE EARNINGS	NEUTRAL	The earnings growth rate for Q3 2022 was 2.4%. For Q4 2022, earnings are expected to decline by -5.0%, down from the previous estimate of -4.6%. This would be the first negative growth since Q3 2020 (-5.7%). So far, 29% of S&P 500 companies have reported actual results — 69% of companies beat EPS estimates, and 60% beat revenue expectations.
EMPLOYMENT	NEUTRAL	U.S. Nonfarm Payrolls for December 2022 increased by 223,000, and the unemployment rate fell slightly to 3.5% from 3.7%. Leisure and hospitality, health care, construction, and social assistance were among the sectors with the most notable gains.
INFLATION	NEGATIVE	The annual inflation rate in the U.S. increased by 6.5% for December 2022 compared to the November reading of 7.1%. This is the lowest CPI value since October 2021. Core CPI increased at a rate of 5.7% versus 6.0% in November. Most prices fell during the last month of the year, including food, used cars, and most energy sources. Electricity and shelter still saw an increase from the previous month.
FISCAL POLICY	NEUTRAL	A few weeks after taking control of the chamber, GOP lawmakers are pushing for austerity measures to improve the nation’s fiscal health. The primary focus areas are federal health care, education, science and labor programs, and Social Security. Democrats have responded harshly, and President Biden has stressed that he will not negotiate a deal with Republicans involving reductions of benefits.
MONETARY POLICY	NEGATIVE	Last month the Fed approved a 50-bps rate hike after four consecutive 75-bps hikes taking its target range to 4.25%-4.50%. Although the magnitude of rate hikes has been decreased, rates are likely to be kept higher through 2023 with no reductions until 2024. According to the FOMC’s dot plot, the expected terminal rate is now 5.1%. The next meetings will be held this week.
GLOBAL CONSIDERATIONS
GEOPOLITICAL RISKS	NEGATIVE	While the Russian-Ukraine conflict does not show signs of abating, additional geopolitical issues have arisen in South America with the violent protests that hit the capital of Brazil last week. Following the October 2022 elections won by the left party, Jair Bolsonaro’s far-right supporters stormed Brasilia accusing the winning candidate and party of corruption. Bolsonaro is currently in Florida and has communicated little publicly.
ECONOMIC RISKS	NEGATIVE	China seems to have abandoned its zero-Covid policy, which should help the global supply chain recover. Gas supplies from Russia to Europe have decreased by 88% over the past year, and EU countries have agreed to cut gas usage by 15% as gas prices have more than doubled. Nevertheless, an unusually mild winter has helped the majority of Europe dealing with increased energy costs.

The Numbers & “Heat Map”

Posted on January 24, 2023 by The Weekly Commentary

THE NUMBERS

US ECONOMY
CONSUMER HEALTH	NEUTRAL	Real gross domestic product (GDP) increased at an annual rate of 3.2 percent in the third quarter of 2022, in contrast to a decrease of 0.6 percent in the second quarter. The third quarter’s increase primarily reflected exports and consumer spending that were partly offset by a decrease in housing investment. The estimated growth rate for Q4 2022 Real GDP is now 3.8%.
CORPORATE EARNINGS	NEUTRAL	The earnings growth rate for Q3 2022 was 2.4%. For Q4 2022, earnings are expected to decline by -4.6%, down from the previous estimate of -3.9%. This would be the first negative growth since Q3 2020 (-5.7%). So far, 11% of S&P 500 companies have reported actual results — 67% of companies beat EPS estimates, and 64% beat revenue expectations.
EMPLOYMENT	NEUTRAL	U.S. Nonfarm Payrolls for December 2022 increased by 223,000, and the unemployment rate fell slightly to 3.5% from 3.7%. Leisure and hospitality, health care, construction, and social assistance were among the sectors with the most notable gains.
INFLATION	NEGATIVE	The annual inflation rate in the U.S. increased by 6.5% for December 2022 compared to the November reading of 7.1%. This is the lowest CPI value since October 2021. Core CPI rose at a rate of 5.7% versus 6.0% in November. Most prices fell during the last month of the year, including food, used cars, and most energy sources. Electricity and shelter still saw an increase from the previous month.
FISCAL POLICY	NEUTRAL	Senator Manchin and Majority Leader Schumer agreed on the latest tax and energy bill with incentives for green energy, electric cars, and oil & gas companies for exploration. No changes in private equity taxes or higher tax rates for the very wealthy were enacted. The Senate has officially passed the bill. President Biden announced student loan forgiveness of up to $20,000, subject to income limitations.
MONETARY POLICY	NEGATIVE	Last month the Fed approved a 50-bps rate hike after four consecutive 75-bps hikes taking its target range to 4.25%-4.50%. Although the magnitude of rate hikes has been decreased, rates are likely to be kept higher through 2023 with no reductions until 2024. According to the FOMC’s dot plot, the expected terminal rate is now 5.1%. The next meetings will be held at the end of January and the beginning of February.
GLOBAL CONSIDERATIONS
GEOPOLITICAL RISKS	NEGATIVE	While the Russian-Ukraine conflict does not show signs of abating, additional geopolitical issues have arisen in South America with the violent protests that hit the capital of Brazil last week. Following the October 2022 elections won by the left party, Jair Bolsonaro’s far-right supporters stormed Brasilia accusing the winning candidate and party of corruption. Bolsonaro is currently in Florida and has communicated little publicly.

ECONOMIC RISKS

NEGATIVE

China seems to have abandoned its zero-Covid policy, which should help the global supply chain recover. Gas supplies from Russia to Europe have decreased by 88% over the past year, and EU countries have agreed to cut gas usage by 15% as gas prices have more than doubled. Nevertheless, an unusually mild winter has helped most of Europe deal with increased energy costs.

The Numbers & “Heat Map”

Posted on January 17, 2023 by The Weekly Commentary

THE NUMBERS

US ECONOMY
CONSUMER HEALTH	NEUTRAL	Real gross domestic product (GDP) increased at an annual rate of 3.2 percent in the third quarter of 2022, in contrast to a decrease of 0.6 percent in the second quarter. The third quarter’s increase primarily reflected exports and consumer spending that were partly offset by a decrease in housing investment. The estimated growth rate for Q4 2022 Real GDP is now 3.8%.
CORPORATE EARNINGS	NEUTRAL	The earnings growth rate for Q3 2022 was 2.4%. For Q4 2022, earnings are expected to decline by -3.9%, down from the previous estimate of -2.8%. This would be the first negative growth since Q3 2020 (-5.7%). So far, 29 S&P 500 companies have reported earnings, with 23 companies beating EPS estimates and 20 beating revenue expectations.
EMPLOYMENT	NEUTRAL	U.S. Nonfarm Payrolls for December 2022 increased by 223,000, and the unemployment rate fell slightly to 3.5% from 3.7%. Leisure and hospitality, health care, construction, and social assistance were among the sectors with the most notable gains.
INFLATION	NEGATIVE	The annual inflation rate in the U.S. increased by 6.5% for December 2022 compared to the November reading of 7.1%. This is the lowest CPI value since October 2021. Core CPI rose to 5.7% versus 6.0% in November. Most prices fell during the last month of the year, including food, used cars, and most energy sources. Electricity and shelter still saw an increase from the previous month.
FISCAL POLICY	NEUTRAL	Senator Manchin and Majority Leader Schumer agreed on the latest tax and energy bill with incentives for green energy, electric cars, and oil & gas companies for exploration. No changes in private equity taxes or higher tax rates for the very wealthy were enacted. The Senate has officially passed the bill. President Biden announced student loan forgiveness of up to $20,000, subject to income limitations.
MONETARY POLICY	NEGATIVE	Last month the Fed approved a 50-bps rate hike after four consecutive 75-bps hikes taking its target range to 4.25%-4.50%. Although the magnitude of rate hikes has been decreased, rates are likely to be kept higher through 2023 with no reductions until 2024. According to the FOMC’s dot plot, the expected terminal rate is now 5.1%. The next meetings will be held on at the end of January and the beginning of February.
GLOBAL CONSIDERATIONS
GEOPOLITICAL RISKS	NEGATIVE	While the Russian-Ukraine conflict does not show signs of abating, additional geopolitical issues have arisen in South America with the violent protests that hit the capital of Brazil last week. Following the October 2022 elections won by the left party, Jair Bolsonaro’s far-right supporters stormed Brasilia accusing the winning candidate and party of corruption. Bolsonaro is currently in Florida and has not communicated little publicly.

ECONOMIC RISKS

NEGATIVE

China has abandoned its zero-Covid policy, which should help the global supply chain recover. Gas supplies from Russia to Europe have decreased by 88% over the past year, and EU countries have agreed to cut gas usage by 15% as gas prices have more than doubled. Nevertheless, an unusually mild winter has helped most of Europe deal with increased energy costs.

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Securities offered through Valley National Investments, Inc. Member FINRA SIPC. The Standard & Poor’s 500 (S&P 500), Morgan Stanley EAFE Developed Countries, and the Lehman Brothers Aggregate Bond Index are an unmanaged group of securities considered to be representative, in general, of the US stock market, the foreign stock market, and the US bond market, respectively. Opinions expressed are subject to change without notice and are not intended to be investment advice or to predict future performance. Consult your financial professional before making any investment decision. Past performance does not guarantee future results. Valley National does not purchase content for its newsletter from outside supplier/vendors. Valley National is in compliance with the current registration and/or notice-filing requirements imposed upon SEC registered investment advisers by those states in which Valley National maintains clients. Advisors of Valley National may only transact business in those states in which they are registered, or qualify for an exemption or exclusion from registration requirements. The Valley National newsletter, The Weekly Commentary, is limited to the dissemination of general information pertaining to investment advisory and financial planning services and other general information it believes would be of interest to its clients and friends. Nothing in this newsletter shall be construed as offering or disseminating specific financial, retirement, estate, asset protection, tax, and/or legal advice. Nothing in this newsletter shall be construed as an offer to sell, or a solicitation to buy securities. Nothing contained in this newsletter shall be construed as creating a planner client relationship by virtue of your access to this newsletter. Readers should not rely solely on any information contained herein to plan your estate, or invest your assets, or plan for your income taxes, or make any other financial planning decision. All trademarks and logos appearing herein are those of their respective owners. Information throughout this newsletter is obtained from sources which we and our suppliers believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Neither we nor our information providers shall be liable for any errors or inaccuracies, regardless of cause, or the lack of timeliness of, or for any delay or interruption in the transmission thereof to the reader. Copyright © 2019, Valley National Group, Inc. All Rights Reserved.

The Weekly Commentary

Observations of the current state of the stock and bond markets

Category Archives: The “Heat Map”

Numbers & “Heat Map”

The Numbers & “Heat Map”

The Numbers & “Heat Map”

The Numbers & “Heat Map”

The Numbers & “Heat Map”

The Numbers & “Heat Map”

The Numbers & “Heat Map”

The Numbers & “Heat Map”

The Numbers & “Heat Map”

The Numbers & “Heat Map”