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Market Recap – December 5, 2022

Keel Point

December 5, 2022

The better-than-expected 263,000 increase in employment in November is positive news for consumers and economic growth and likely won’t affect the Fed’s decision to increase interest rates by 50 basis points at its December 13-14 meetings.

  • The unemployment rate remains at 3.7%, and average hourly earnings increased 0.6% — more than expected, with earnings up 5.1% over the past 12 months.
  • Fed Chair Jerome Powell said last Wednesday that “inflation remains far too high,” but because “Monetary policy affects the economy and inflation with uncertain lags … it makes sense to moderate the pace of our rate increases… [which] may come as soon as the December meeting.”
  • Before its next meeting, the Fed will have November Producer Prices (Dec 9) and CPI (Dec 13).

Consumers are supporting Q-4 GDP growth, with the stronger dollar and weaker growth overseas holding down U.S. exports and spurring higher U.S. imports which reduce U.S. GDP growth.

  • With consumer spending representing about 2/3rds of GDP, Q-4 consumer spending estimates support positive economic growth in Q-4.
  • With exports down (2% m/m) and imports rising, “net exports” are likely to change from adding 3% points to Q-3 GDP growth to being a drag in Q-4.
  • The debate about U.S. recession continues, and a 2023 recession is increasingly likely, albeit shallow and short lived. We can’t ignore the Leading Economic Indicators being down again in October and the 10-year Treasury / 1-month Treasury yield curve inversion, both harbingers of recession.

Disclosure: Securities offered through Keel Point Capital, LLC, Member FINRA and SPIC. Brokerage and Investment advisory Services are offered under the Keel Point brand. Investment Advisory services offered by Keel Point, LLC an affiliate of Keel Point Capital, LLC. While reasonable efforts have been made to provide data from sources considered to be reliable, no guarantee of accuracy is given. Keel Point does not give tax, accounting, regulatory, or legal advice to its clients.

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