December Stock Market Update: Four Small Wins

At a Glance

• The economy bounced back in Q3
•  The Social Security Administration announced the biggest cost-of-living adjustment (COLA) in four decades
• The stock market closed out two good months in a row
• The bond market similarly was up a historic amount for the month of November

Small Win #1: The Economy Bounced Back in Q3

U.S. economic growth made a comeback last quarter – the economy grew 2.6% after shrinking in the first half of 2022. That's good news because it means we're not in a recession (yet).¹ But, there are a couple of caveats we should pay attention to:

1. This data is only a first estimate. It'll be revised twice more before it's final. (So we could be in a recession)
2. A recession is still more likely than not, with an uncertain growth picture for 2023.²

Small Win #2: The Social Security Administration announced the biggest cost-of-living adjustment (COLA) in four decades

Because of this year's red-hot inflation, Social Security beneficiaries will see a COLA of 8.7% in 2023.³ On top of the (tiny) drop in 2023 Medicare Part B premiums, this is good news for the retirees (and low-income kids and families) who have seen inflation take a big bite out of their income.³ However, some folks are concerned about the impact of higher lifetime benefits on Social Security's future solvency.

Small Win #3: The Stock Market Closed Out Two Good Months in a Row

After weeks of volatility and selling pressure, stocks had a good month returns in October and November, with the Dow marking its best month since 1976 and its best October ever.⁴ Keep in mind, these types of rallies are common in a bear market and are a potent reminder of why its important to keep emotions out of investing.

Small Win #4: The Bond Market Similarly Was Up a Historic Amount for The Month of November

In November we received some of the best news all year, inflation is falling faster than expected!  Long treasury bonds were up between 7 and 8 percent in November.  With inflation falling and recession fears climbing we expect the bond market to continue to produce positive results for investors.  With the federal reserve signaling a slowing and eventually pause in rate hikes, there is light at the end of the tunnel.  Remember bonds like stocks will anticipate the future.

Is The Bear Market in Stocks Over? Is The Bottom Behind Us?

There's no way to know for sure, but it's not likely. The Federal Reserve decision to hike interest rates 0.75% is likely to weigh further on markets, though Jerome Powell gave an almost certain indication they may will be slowing the pace of hikes in the future.⁵ So, let's stay flexible and remember that those good and bad market days often cluster. Bottom line: The overall market and economic picture looks as uncertain and hazy as ever. But there are good weeks (and months) and small wins along the way. Let's take a moment to appreciate them.

Sean West, Wealth Management Advisor/ CFP®

Disclosure

This blog reflects the personal opinions, viewpoints and analyses of the White Cloud Wealth Management employees providing such comments, and should not be regarded as a description of advisory services provided by White Cloud Wealth Management. The views reflected in the blog are subject to change at any time without notice. Nothing in this material constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security.