The Numbers & “Heat Map”

Posted on February 28, 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 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 “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 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.

The Numbers & “Heat Map”

Posted on January 10, 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 increase in the third quarter primarily reflected increases in 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 -4.1%, down from the previous estimate of -2.8%. This would be the first negative growth since Q3 2020 (-5.7%). So far, 20 S&P 500 companies have reported earnings, with 15 companies beating EPS estimates and 13 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 7.1% for November 2022 compared to the expected 7.3% — showing some continued signs of deceleration. Core CPI was also reported below expectations at 6.0% versus the estimated 6.1%. Although energy prices have come down, energy, along with food and shelter, are still the main contributors to inflation. December inflation data is set to be released this Thursday, 01/12.
FISCAL POLICY	NEUTRAL	Senator Manchin and Majority Leader Schumer reached an agreement on the latest tax and energy bill with incentives for green energy, electric cars, and conversely oil & gas companies for exploration. No changes in private equity taxes or higher tax rates for the very wealthy were enacted. The bill has been officially passed by the Senate. President Biden announced student loan forgiveness of up to $20,000 subject to income limitations.
MONETARY POLICY	NEGATIVE	Two weeks ago 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%.
GLOBAL CONSIDERATIONS
GEOPOLITICAL RISKS	NEGATIVE	Russia held controversial referendums for the annexation of four Ukrainian regions and the Russian Parliament unanimously recognized these regions as part of Russia. Ukraine and Western countries have condemned these actions by Russia by declaring them illegitimate and illegal.Additional sanctions are being imposed on Russia by many countries.
ECONOMIC RISKS	NEGATIVE	China seems to have abandoned its zero-Covid policy, which should help the global supply chain recover. On the other hand, the Russian-Ukraine war does not show signs of abating. 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. The U.S. is now dealing with a significant diesel shortage, with national reserves at their lowest levels since 1951 and a ban on Russian products that will intensify the issue.

The Numbers & “Heat Map”

Posted on January 3, 2023 by The Weekly Commentary

THE NUMBERS

US ECONOMY
CONSUMER HEALTH	NEUTRAL	Real GDP for Q2 2022 decreased at an annual rate of 0.6% (up from the first estimate of -0.9%) marking the second consecutive quarter of declining GDP. The second estimate for Q3 2022 shows Real GDP to have increased by an annual rate of 2.9%, up from the previous advance estimate that reported a 2.6% gain.
CORPORATE EARNINGS	NEUTRAL	The earnings growth rate for Q3 2022 was 2.4%, adjusted upwards from 2.2% last week. All the S&P500 companies reported actual results; 70% beat EPS expectations, while 71% beat revenue expectations. For Q4 2022, earnings are expected to decline by -2.8%. This would be the first negative growth since Q3 2020 (-5.7%).
EMPLOYMENT	NEUTRAL	U.S. Nonfarm Payrolls for November 2022 increased by 263,00, and the unemployment rate remained at 3.7%. Wages have risen more than expected at a rate of 5.1% Year over Year. Service sectors contributed the most to the increase in jobs, while industries sensitive to rising rates, such as construction and manufacturing, have started to level off.
INFLATION	NEGATIVE	The annual inflation rate in the U.S. increased by 7.1% for November 2022 compared to the expected 7.3% — showing some continued signs of deceleration. Core CPI was also reported below expectations at 6.0% versus the estimated 6.1%. Although energy prices have come down, energy, food, and shelter are still the main contributors to inflation.
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	Two weeks ago, 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%.
GLOBAL CONSIDERATIONS
GEOPOLITICAL RISKS	NEGATIVE	Russia held controversial referendums for the annexation of four Ukrainian regions, and the Russian Parliament unanimously recognized these regions as part of Russia. Ukraine and Western countries have condemned these actions by Russia by declaring them illegitimate and illegal. Additional sanctions are being imposed on Russia by many countries.
ECONOMIC RISKS	NEGATIVE	COVID-19 lockdowns in China are easing, which should help the global supply chain recover. On the other hand, the Russian-Ukraine war does not show signs of abating. 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. The U.S. is now dealing with a significant diesel shortage, with national reserves at their lowest levels since 1951 and a ban on Russian products that will intensify the issue.

The “Heat Map”

Posted on December 27, 2022 by The Weekly Commentary

US ECONOMY
CONSUMER HEALTH	NEUTRAL	Real GDP for Q2 2022 decreased at an annual rate of 0.6% (up from the first estimate of -0.9%), marking the second consecutive quarter of declining GDP. The second estimate for Q3 2022 shows Real GDP to have increased by an annual rate of 2.9%, up from the previous advance estimate that reported a 2.6% gain.
CORPORATE EARNINGS	NEUTRAL	The earnings growth rate for Q3 2022 was 2.4%, which was adjusted upwards from 2.2% last week. All the S&P500 companies reported actual results; 70% beat EPS expectations, while 71% beat revenue expectations. For Q4 2022, earnings are expected to decline by -2.8%. This would be the first negative growth since Q3 2020 (-5.7%).
EMPLOYMENT	NEUTRAL	U.S. Nonfarm Payrolls for November 2022 increased by 263,000 and the unemployment rate remained unchanged at 3.7%. Wages have risen more than expected at a rate of 5.1% Year over Year. Service sectors contributed the most to the increase in jobs while industries that are sensitive to rising rates, such as construction and manufacturing, have started to level off.
INFLATION	NEGATIVE	The annual inflation rate in the U.S. increased by 7.1% for November 2022 compared to the expected 7.3% — showing some continued signs of deceleration. Core CPI was also reported below expectations at 6.0% versus the estimated 6.1%. Although energy prices have come down, energy, food, and shelter are still the main contributors to inflation.
FISCAL POLICY	NEUTRAL	Senator Manchin and Majority Leader Schumer reached an agreement on the latest tax and energy bill with incentives for green energy, electric cars, and conversely oil & gas companies for exploration. No changes in private equity taxes or higher tax rates for the very wealthy were enacted. The bill has been officially passed by the Senate. President Biden announced student loan forgiveness of up to $20,000 subject to income limitations.
MONETARY POLICY	NEGATIVE	Two weeks ago 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%.
GLOBAL CONSIDERATIONS
GEOPOLITICAL RISKS	NEGATIVE	Russia held controversial referendums for the annexation of four Ukrainian regions, and the Russian Parliament unanimously recognized these regions as part of Russia. Ukraine and Western countries have condemned these actions by Russia by declaring them illegitimate and illegal. Additional sanctions are being imposed on Russia by many countries.
ECONOMIC RISKS	NEGATIVE	COVID-19 lockdowns in China are easing, which should help the global supply chain recover. On the other hand, the Russian-Ukraine war does not show signs of abating. 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. The U.S. is now dealing with a significant diesel shortage, with national reserves at their lowest levels since 1951 and a ban on Russian products that will intensify the issue.

Valley National Financial Advisors, and its family of companies, has been in the Lehigh Valley since 1985. The company is independent and locally owned. As a respected and trusted organization, our relationships with many clients and their families transcend generations. We have the expertise to provide clients with financial strategies to effectively manage their existing assets and to provide for the eventual transfer of their wealth.

Our one-stop service model includes: Financial Planning – Investment Management – Estate Planning – Retirement Planning – Education Planning – Tax Planning & Preparation – Insurance Planning – Trust Services, offered as a Trust Representative Office of National Advisors Trust Company, FSB – ExecutiveEdgeTM, Personal Financial Planning for Corporate Leaders. Our services are provided by a team of objective professionals and managed by one contact person – your personal financial advisor.

Valley National Financial Advisors is proud home of the Lehigh Valley’s most CFP® – Certified Financial Planner Professionals^TM. Among other honors, Valley National has been voted Best Financial Planner in the Lehigh Valley seven times by the readers of Lehigh Valley Magazine, and ranked among FA Magazine’s Top RIAs and AdvisorOne’s Top Wealth Managers.

For more than years, our firm has been devoted to helping our clients to achieve their hopes, dreams and aspirations. This requires a delicate balance between the science of financial planning and the art of understanding the feelings and emotions of our clients and their families.

Meet Our Team of Experienced, Highly Educated Professionals

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”

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”

The “Heat Map”