Consumers are becoming more upbeat, at odds with disappointing retail sales in December. More companies are mentioning job cuts on earnings calls. Slack in the labor market will put downward pressure on wage growth at a time when companies are also benefiting from falling input prices. Equity market declines haven’t been evenly distributed. When will bonds behave like bonds again? A major demographic change. Innovation helps to drive lower inflation.
1. Falling energy prices and slowing inflation are improving consumer sentiment:
Source: University of Michigan Survey of Consumers
2. Slower inflation is leading to lower inflation expectations, a positive development for the Federal Reserve:
Source: Daily Shot 1/17/2023
3. Nominal retail sales are falling as goods prices deflate while real retail sales are roughly in-line with the pre-pandemic trend:
Source: Daily Shot 1/19/2023
4. The technology sector is leading the way on job cuts, but other sectors have yet to follow:
5. Wage growth is likely to slow in the coming year:
6. Producer prices have fallen in recent months, but consumer prices have yet to follow:
7. When opportunities are widely dispersed active managers should do well:
Source: Daily Shot 1/18/2023
8. The level of interest rates reflects the strength of the economy. Interest rates rose in 2022 among as the economy grew and unemployment remained low. We question whether rates can continue to rise if the economy deteriorates:
9. What will stagnant population growth in China mean for the global economy over the next decade?
10. Prices of durable goods declined for 20 years leading into the pandemic. Perhaps that trend has changed but we would not bet against future innovations: