Wentz Weekly Insights
Stocks Fall 19.4% in 2022, How Will 2023 Shape Out?
Recent Economic Data
- Data from the S&P Case Shiller Home Price Index showed home prices declined 0.5% before seasonal adjustments in October and declined 0.3% after seasonal adjustments. All 20 cities in the index reported a decline in the month. Compared to a year earlier, the home price index increased 9.2%, slowing again from the 10.7% rate in the previous month, and down sharply from the record high annual increase of 20.6% in March this year. Miami (+21%), Tampa (+20.5%), and Charlotte (+15.0%) continue to be at the top with Minneapolis (+5.9%), Seattle (+4.5%), and San Francisco (+0.6%) at the bottom. Cleveland home prices up 8.7% y/y.
- For the week ended December 24, there were 225,000 unemployment claims, a slight increase of 9,000 from the week prior but remaining around very low levels that suggest a still tight labor market. The four-week average was 221,000, relatively unchanged from the prior week. The number of continuing claims was 1.710 million, up another 41k from the prior week and rising 10 of the past 13 weeks from a post-Covid low of around 1.300 million.
- Data supporting the rate of inflation coming down is the trend in money supply in the economy. In November, the money supply (M2) fell 0.3% and is now 1.8% down from its highs in March 2022 and near the levels it was last at in October 2021. It sounds like a small move especially when you compare it to the 39% increase since February 2020, right before the pandemic started, but is welcoming considering the sustained increases seen 2020-2022.
- The National Association of Realtors’ pending home sales index, which is considered a leading indicator on the housing market as it looks at home sales based on contract signings, fell 4% to 73.9 in November for the second lowest reading ever in the past 20 years.
- The average 30-year mortgage rate rose to 6.42% in the week ended December 29, up from 6.27% the prior week after seven consecutive weeks of declines. The high this year was 7.08% the beginning of November and the low was 3.11% where the 30-year rate started the year.
- Shares of Southwest Airlines were lower after the company had to cancel nearly three-fourths of its scheduled flights over the Christmas holiday weekend and following days. The Department of Transportation later said it was investigating Southwest over the “disproportionate and unacceptable rate of cancellations.” It wasn’t until Friday the company said the flight schedule returned to normal, without the disruptions.
- The Information is reporting Amazon is planning to create its own stand-alone sports streaming app after having made multiple investments into live sports, but says it is not clear when it would be available or if it will ultimately be rolled out. CEO Andy Jassy has in the past said live sports would be an area that will keep seeing spending even as the company is cutting costs.
- Tesla stock fell after it said it produced 439,000 vehicles and delivered 405,000 vehicles in Q4, which represented a 31% increase from a year earlier, but missing the estimate of 421,000 vehicle deliveries. Inventories grew about 34,000 vehicles to now stand at about 78,000.
- Retirement plan contributions: Did you know 2023 IRS limits have been increased? In addition to tax brackets being updated, the IRS increase the amount individuals can add to retirement plans. If you are in a workplace retirement plan, the annual contribution limit was increased
- 401k/403b/other qualified plans – Increased to $22,500 from $20,500
- IRAs (including Roth IRAs) – Increased to $6,500 from $6,000
- Simple IRAs – Increased to $15,500 from $14,000
- Over the age of 50? Catch up contributions were increased as well. If over the age of 50 you can contribute an additional $7,500 to qualified plans (401k, etc), up from $6,000, an extra $3,500 to Simple IRAs, up from $3,000, however the catch up for IRAs is unchanged at $1,000.
- Haven’t contributed to an IRA for 2022? Remember you have up until the time you file your taxes, or April 18, to make a 2022 IRA contribution.
- Budget: Review 2022’s budget and see how your money has been spent to get a better idea of your spending patterns and create a 2023 budget. This could be an opportunity to find where you could save money to find more options for savings and/or investments. This could also be a chance to review debt to help prioritize working down those balances.
- Review retirement accounts: Look at rebalancing accounts to match the desired asset allocation to your goals, objectives, and risk tolerance, as well as the current environment. Need help reviewing outside accounts or workplace retirement plans (401k’s)? Do not hesitate to reach out and ask for help!
The Week Ahead
This week will be another shortened trading week as markets were closed Monday in observance of New Year’s Day. Reports on the economic calendar focus mostly on the labor market with the job openings and labor turnover survey on Wednesday that is expected to show job openings fell to about 10 million from 10.33 million. This will be followed by the ADP employment report and weekly jobless claims on Thursday and the Department of Labor’s employment report on Friday where economists are expecting 200,000 new jobs were added in December and wage growth of 5.0% from a year earlier. Other economic data releases include PMI and ISM manufacturing index results, construction spend for November, motor vehicle sales for 2022, factory orders, and the release of the Fed’s December meeting minutes. The Fed may be back in focus with several public appearances by policymakers in the second half of the week. With fourth quarter now over, earnings results will start to come in with notable results from Walgreens, Conagra Brands, and Constellation Brands on Friday, before earnings season really kicks off next week with the big banks. Tech will be in the headlines as the Consumer Electronic Show, the biggest and most notable tech conference of the year, heads back to Las Vegas this week running from January 5-8. On the political front, the 118th Congress begins with lawmakers being sworn in and a floor vote will be held to determine Speaker of the House.