Why Does the Market Seem So Confusing?

In this episode we talk about the different headlines we have continued to see when covering the market and economy. We talk about what the data is actually showing us and how that is being covered and reacted to. It all seems confusing, but it is not as confusing as you may think! 

Transcript

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Eddie Thomas: 0:00

Hey, what's going on? Welcome to the life finance and in between podcast once again, I'm Eddie Thomas, this brought to by wealth management services in Hershey, Pennsylvania. And I spoke about it briefly in last podcast, I'm talking about it in this podcast, and we're going to talk about the economy is is strong? Is it showing strength weakness? It's really confusing what is going on? And we're gonna jump into it, we're gonna break it down. And why do I feel like I even need to talk about this? Well, because when you look at the data, and then when you look at the media and the headlines, and what people are saying, it could not be same or polar opposite things. And it's actually kind of crazy. And I want to break it down for those of you who see the data and I got, well, this sounds kind of good. And then you turn around, you look at the news, you're like, well, they're saying horrible things. And then you see CEOs of one company saying, we're gonna go into recession, and then another company saying, We think we're really strong and things are going to continue to go well. And it's kind of hard to see where everything lies. So I want to talk about it. So let's do that. And here we go. So like I said, it kind of felt like, all the way through 2022. And even now, coming into 2023, it almost felt like good news is actually bad news. And what I mean by that is, whenever you have the monthly reports coming out that we're seeing any other time in history, they be positive, for example, we added 223,000 jobs in December to the labor market. Always a good thing when you add jobs, except for now when people panic. Consumer spending was really good and 2022. consumers continue to spend on both goods and services, products and services. And that's really good. It was actually up, consumer spending was up 3.7% In retail spending last year, and up 10% for services last year. Now again, some of that is actually is attributed to inflation being up, but not 100% of it. So people are still spending, people are still spending and spending well. And finally, the last three months for the stock market, so October of 22, to even now, beginning or middle of January, the stock market has performed very well. But again, you don't really notice that because of all the headlines that are coming out. So when you take a look at those things, the confusing part is when I tell you, we're adding jobs month to month, consumer spending was really good in 2022. And looks like it's going to continue to be well in 2023. And the stock market has been on a real little bit of a bounce here little rebound from Lowe's, you would think okay, all noise aside all media headlines out of sight. The economy is doing fine. Yes, inflation is high, but the economy is doing fine. We're doing what we're supposed to do. We're supposed to add jobs, we're supposed to spend money. This is how we move forward as a country as investors as the economy, this is how we do it. Right. And everybody else would say yes, every other time. But now, we're falling into a part where everyone is reacting poorly, to seemingly good news. So we had when the job market came out in December, and we saw that we had a 223,000 jobs for people that were looking towards them, looking for them. The market actually responded a little bit poorly to that it didn't really go up like it's supposed to when you have good news. And when spending goes up, it didn't really react well to that. And the reason why is because of how the Fed is talking because of how media companies are conveying this message. And muscling media companies are bad. And they're evil. My saying that at all. They do a very important job of spreading information. I just think right now, there's a lot of fear out there because you keep seeing the word recession, and you keep seeing the word of contraction, the economy and those types of headlines and you see a bunch of job layoff headlines, which we'll talk about in a future podcast. You see all these things? And when you keep seeing things like this, you think, Okay, well, there's nothing good going on. Nothing is right. And that's just not true. Okay, gonna outline things, we're actually going well on any other kind of stage there other than how we're thinking about things now. And the reason why is because how, like I said, the Fed is conveying the message that this is the opposite of what they want to happen. When there's elevated inflation. What the Fed has come out and routinely said is we want unemployment to increase from 3.7% to 4.5%, or around that kind of area there. We want decreased consumer spending is what they want on that side. And that comes with higher unemployment. And we want this to kind of slow down a little bit. Now, why would they want this to slow down? Well, they want to slow down because we're raising interest rates and they're raising interest rates to slow the economy down to bring down inflation down to the tooth two to 3% goal that they have. And because it's it hasn't happened as quickly, I guess as they want it to. They just keep pushing us and keep raising interest rates. So people are starting to panic a little bit and say, Okay, well, if there's gonna push us into this recession, there's really nowhere else for us to go. But it almost feels like everyone's kind of forgetting what quote unquote, a soft landing is supposed to look like. And what we wanted it to look like a soft landing was going to be when is when the Fed continues to raise interest rates, and brings down inflation, while the economy remains strong. While we still have a steady unemployment rate, while we're still potentially adding jobs. While consumers are still spending money. People hear recession, and they immediately go back to 2008. And start to panic, because that's the last time we saw anything like this, you even last time even heard the word recession, at least used consistently enough. And we're not anywhere near what 2008 was, banks have been much more stringent on who they are giving loans to so the housing market is not at all in a situation like it was back in 2008. When someone can get three homes with one income, and have all those loans. Banks have been stress test since 2008. And they're still very strong if the if the market or the economy did take a downturn, and they are not going to go out and need to get bailed out like they did in 2008. So what we're looking at is nothing like what 2008 was not at all. But when you hear the word recession, you just kind of pin it back to the last thing you saw. And that was unfortunately, 14 to 15 years ago, when we saw that, again, not where we're at whatsoever, the economy still actually showing a lot of strength. But the idea that the feds gonna keep pushing us is scaring a lot of people and investors and media headlines isn't helping that whatsoever. So that's why I'm here to tell you that the economy is not I mean, just data alone, still looks good. And as time goes on, and inflation keeps coming down, and the job market stays consistent, and consumer spending stays consistent. I actually think the idea that we can get a soft landing, and those chances keeps increasing. And if we get a soft landing, that's probably the best news that we can possibly hope for in 2023. Again, it's going to take all year to kind of see that play out. But again, that's ideal, because like I said, the economy's doing well. So, of course, there's always each side to every, every conversation. And I know what the argument would be against what I just said. So I'm going to talk about him right now. And that's all the potential headwinds that we have. And I'm not naive to these either. We have geopolitical tensions rising, and still the Russia Ukraine war, you have China trying to ease their COVID restrictions, we don't know what that's gonna look like. So yes, you have geopolitical tensions that are still playing themselves out to see where we kind of land with that. And that's should deal with itself in 2023. At some point, you have supply chain disruptions, that's still happening, whether it's increased energy prices, although we talked in the last podcast about them coming down. They're still they're still higher than they were. You have labor shortages in the supply chain. So that doesn't help us. You have other weaknesses, and energy and food supplies, especially internationally. But like I said, last time to something like the avian flu is that weakness in the food supply market? So yes, you still have supply chain disruptions, and weakness and energy and food supplies in certain areas. Inflation still points, six 6.5%. So yes, it's still much higher than we want it to that two to 3% benchmark, but it's gonna take time to get there. So as long as that continues to show promising results, I don't think that's gonna be super detrimental. Like I said, last time, as long as the Fed doesn't surprise us, and inflation keeps coming down. Now, again, that could reverse if inflation starts ticking up again, then we got some things to figure out. And finally, the other headwind, like I just said, is a continuous practice of raising rates, and quantitative tightening, tightening, like we've, we've seen. Ideally, you we see these work themselves out, and we're starting to, and it's going to take time. And I know, you're kind of sitting there potentially saying okay, well, we had all 22 To figure this out, and we didn't, and I went 2023 Well, yes. But these things take time to play out. So while they're playing themselves out, if we're in a world where we're still adding jobs, we're still spending money and the markets performing well. I think we're in a much better spot because of that, both from a peace of mind standpoint, a market standpoint as far as our returns are concerned and market performance for the year, and just an overall quality of life standpoint of people are still making money still getting raises and still spending that. So well. Yes, the media is going to paint a picture that's very bad and scare some people. And you'll hear CEOs come out and say one thing, you hear the Fed say the other looked down at the data, we're still looking pretty positive going into 2023 We'll see where that takes us. But the data looks good. The media economy is confusing right now, and we're going to work through it. So until the next one, stay happy, stay healthy, and I'll see you. Securities offered through securities America Inc. Member FINRA slash SIPC. advisory services offered through securities America advisors Inc. Wealth Management Services and securities America are separate entities. The opinions and forecasts expressed are those of the author and may not actually come to pass. This information is subject to change at anytime based on market and other conditions and should not be construed as a recommendation of any specific security or investment plan. Past performance does not guarantee future results.