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  • Writer's pictureDoug MacGray

Lots of Jobs, Tech Keeps Rolling, and Evergrande Collapses

Updated: Feb 13

February 4, 2024


"This is a good situation. Let's be honest. This is a good economy. We do expect growth to moderate. Of course, we have expected it for some time, and it hasn't happened." Jerome Powell, Wednesday press conference.


LABOR MARKET HAS ANOTHER STRONG MONTH:  In January, the U.S. economy added 353,000 net new jobs. Jobs declined in mining, quarrying, and oil and gas extraction, but that was more than made up in professional and business services, health care, retail trade and social assistance jobs. The unemployment rate remained the same at 3.7%. The only category of jobs that is still below the 2019-2020 peak are leisure and hospitality jobs, but those are at 99% of the level they were just before the government shut down much of the economy in 2020. In January, wages were 4.5% higher than a year ago. Higher pay certainly has an effect on inflation. It does not necessarily lead to more spending, but that is often what happens. If workers save more, wages could rise without pushing prices higher. Or, if businesses can ramp up output sufficiently to meet demand through gains in productivity, inflation could be muted relative to spending growth. There are reasons to be optimistic on these fronts, but 4.5% wage growth could slow inflation progress. Bottom line, everyone who is able should save more!



THE FED DOESN'T MOVE...AGAIN:  For the fourth straight meeting, the Fed maintained its key interest rates at the same level. That decision was unanimous. The Fed hinted at a future cut, but dampened expectations that they could come as early as March. This caused one day of stocks pulling back. The Fed indicated that there is no urgency to lower rates as it waits and sees if inflation will continue to move and stay in a healthy place. It seems likely that they will need to wait at least one more meeting. Thus, it is likely the Fed will hold steady for the fifth straight time in late March, when it meets again.


TECH-LED STOCK RALLY CONTINUES:  Another week, another rally in U.S. large company stocks. The S&P 500 and the Dow Jones Industrial Average both hit new highs last week. Large tech companies reported fourth quarter earnings, and investors liked what they saw. Meta rose nearly 20% after reporting a big quarterly sales increase and announced its first dividend, ever. Amazon rose over 7% and Nvidia rose over 8%. That was enough to continue the pattern of a few large tech companies leading the stock markets indices to new highs.  Apple was not one of the winners last week. Due to a 13% drop in sales in China, its stock dropped a bit this week.





LONGER-TERM PERFORMANCE: Below are the annualized three-year and five-year numbers for these same indices.



TECH KEEPS LAYING OFF:  While tech stocks in the U.S. keep rising in value, tech companies keep laying off workers. Okta, a cybersecurity company, was the latest to announce a layoff, stating that it will layoff about 7% of its employees, or about 400. Last year it shed 300 workers.  


EUROPE IS NOT KEEPING UP:  In 2023, the U.S. economy grew at an annual rate of 2.5%. The eurozone grew 0.5%. The eurozone is closer to geopolitical hot zones. The U.S. is an energy producer, so the energy shocks caused by two wars is more easily absorbed by the U.S. economy. The IMF is now predicting 0.9% growth for all of 2024 for the eurozone.


EVERGRANDE COLLAPSES:  Evergrande Group was a giant real estate developer in China. As recently as 2018, it was considered the most valuable, worldwide real estate company.  But it grew too rapidly while depending too much on debt to leverage that growth. As the Chinese economy slowed, Evergrande began having trouble making its debt payments and completing projects. Last week, a Hong Kong court ordered the liquidation of Evergrande Group. Recently, the company unsuccessfully tried to restructure its $300 billion in debt. The ordered liquidation comes as no surprise as it began defaulting on its debt back in 2021.





REAL HOUSE PRICES STAY HIGH:  We all know that there are not enough houses on the market, and the interest rates are much higher than in recent memory. That is making housing affordability difficult. As you can see below, even accounting for inflation housing prices are near their all times highs.





DON'T GET BIG PAPI ANGRY!:  This is a leftover from Christmas. Grandkids and grandnephew and grandniece were messing with me.



It's not a good idea to get me angry, apparently.


Have a great week!


Our mission is to help you see the objective, find the path, and navigate past the obstacles to a more prosperous future.


Douglas R. MacGray, J.D., C.F.P. ®

President

Stonecrop Wealth Advisors, LLC

Direct | Cell | Fax

(610) 628 4545


Alice: "How long is forever?" White Rabbit: "Sometimes, just one second."  Lewis Carroll


"Moreover, when God gives someone wealth and possessions, and the ability to enjoy them, to accept their lot and be happy in their toil -- this is a gift of God. They seldom reflect on the days of their life, because God keeps them occupied with gladness of heart." Ecclesiastes 5:19-20


SOURCES:

THE FED DOESN'T MOVE...AGAIN: gritcap.io


*S&P 500: This is a measure of the performance of the 500 largest companies in the United States, and it a common index to track the performance of U.S. equity markets, especially the large cap markets.

*MSCI All Country World Index X US: This is a broad measure of the performance of worldwide equity markets excluding the United States.

*Bloomberg U.S. Aggregate: This is a measure of the U.S. bond markets.


Investment advisory services offered through Stonecrop Wealth Advisors, LLC, a Registered Investment Advisor with the U.S. Securities and Exchange Commission.

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