Great Start to the New Year

February 1, 2023

Last month we pointed out January is traditionally one of the better months for stock market performance and it was again this year.  Regardless of your income level, if you have a 401k, you are contributing in January, so the inflow of funds is stronger than any other month.  We know that just because mutual fund companies are receiving large inflows does not mean they are putting that money to work immediately.  However, with the disappointing year we had in 2022, capped by the worst December since 2018, we may be seeing the money deployed more quickly than normal. In addition, economic and corporate news during the month is convincing many the Federal Reserve is going to be able to engineer a “soft landing”.  That would portend a mild recession rather than a market meltdown.  At the end of the month the S&P 500 had gained 6.2%, erasing all of December’s losses.  Oil had a volatile month that ended with a $1.50 loss and gold took advantage of a weakening dollar to rally $100.  Despite hawkish comments from the Federal Reserve, the rate on the 10 year Treasury actually dropped from 3.88% to 3.53%.

We began the new year on a Tuesday after the Monday holiday with the market edging lower on the first day of trading.  The big economic report this week was the government jobs report that showed a stronger than expected 223,000 jobs were created in December, but wage gains were less than expected and that ignited a nice rally that left the S&P 500 1.5% higher for the week.  The first full week we got our first look at 4^th quarter earnings reports, and they were better than many had feared sending the S&P 500 briefly above the 4000 level for the first time since mid-December.  At the end of the week the S&P 500 had gained another 2.7%.  The third week was another holiday shortened affair that began with the Martin Luther King Jr holiday and featured a disappointing report on December retail sales that sent the S&P 500 down more than 2%.  A strong oversold bounce on the last day reduced the S&P 500 loss for the week to .7%.  The last full week of the month saw  more earnings reports that helped the January rally continue, adding another 2.5%.  We closed out the month with a strong sell off on Monday followed by a strong rally on Tuesday.

February is the only month of the year that has an average return of 0 and has advanced just 6 more times than it has declined over the past 90 years.  The Federal Reserve appears to be getting close to the end of their current tightening cycle and quarterly earnings reports will start to wind down.  There will still be substantial amounts of money flowing into 401k plans, but after a strong January we may see some profit taking.  The market is likely to focus on the CPI report that will be released on Valentine’s Day and the pace of reopening in China will be important.  Remember, China has 20% of the global population and they have been locked down for 3 years and are ready to travel and spend.  Rising interest rates have slowed our economy and the question we are asking is whether the China reopening might negate some of our domestic slowing.  We have been in a defensive mode for the last few months and believe that is still the appropriate approach.

If you know someone who would be interested in learning more about Greenberg Financial Group, please contact us at 520-544-4909, or visit our NEW website at www.greenbergfinancial.com. As always, the key to successful investing is to have a portfolio that is consistent with your investment objectives and risk tolerance. We invite you to listen to our weekly Money Matters radio show which airs every Sunday Morning from 8:00 AM to 10:00 AM on KNST AM 790.  You can also listen to us on iHeart radio, follow us on Twitter @gbergfinancial or on Facebook under Greenberg Financial Group.  You can now listen to previous shows by going to www.iheart.com or using the iHeart app.