The Federal Funds Rate rose from approximately 0% to over 4% in a fairly rapid time. While the pace of interest rate rise was strong the actual rate is still quite low when we compare it to historic levels in the chart below from the Federal Reserve Economic Data (FRED) web-site. This level of interest rates may continue to offer a nice opportunity for businesses or home owners to borrow without significantly hampering future growth.<\/p>\n\n\n\n
<\/p>\n\n\n\n
<\/p>\n\n\n\n <\/p>\n\n\n\n <\/p>\n\n\n\n Employment remains at very high levels. The Unemployment Rate released on 1\/6\/2023 indicated an unemployment rate of 3.5%. This remains an extremely low level. Additionally, as of the end of November 2022, the number of job openings versus unemployed persons remained extremely elevated. The chart below is from a J.P. Morgan Asset Management presentation with information from the U.S. Department of Labor. This high level of job openings versus unemployed persons and low unemployment rate indicate that we still have significant slack in the labor market. Even with a higher number of announced layoffs in recent months, we have a long way to go before there is real pain in the overall economy.<\/p>\n\n\n\n <\/p>\n\n\n\n <\/p>\n\n\n\n Lastly, banks were forced to ramp up capitalization ratios and lending standards following the 2008-2009 financial crises. FRED reports that as of July 1, 2020, loan loss reserves to total loans for all U.S. Banks was over 2%. Unfortunately, FRED is no longer tracking this data. However, JPMorgan Chase & Co. reported an allowance for loan losses to total retained loans ratio of 1.7% as of September 30, 2022.\u00a0<\/p>\n\n\n\n <\/p>\n\n\n\n <\/p>\n\n\n\n Jamie Dimon, the CEO of JPMorgan Chase & Co., was documented as cautioning investors regarding future economic conditions. He said this while also saying that in the third quarter they were not seeing significant signs, if any, of deteriorating quality. I appreciate major banks being cautious. Being prepared can help cushion any impact of economic slowdown. It is when banks are blindsided, overextended to risky loans and left with low reserves to handles bad loans that economic lending can freeze.<\/p>\n\n\n\n Given these historically strong and cautious conditions, I believe it is possible the stock market is already reflecting the economic slowdown that may occur in 2023. There is always the possibility of black swan events that none of us are expecting. However, there\u2019s no denying that most stocks are on sale to the tune of 15-30%, or more, from their high prices. That\u2019s a pretty attractive discount.<\/p>\n","protected":false},"excerpt":{"rendered":" Happy New Year! Good riddance to 2022! There were many good parts of 202–extremely low unemployment, less mask wearing, higher home values and strong commodity returns. However, for the stock and bond markets as a whole, it was a bummer year and I think we are all happy to put it behind us. The S&P […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"off","_et_pb_old_content":"","_et_gb_content_width":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[119,123],"tags":[],"class_list":["post-6669","post","type-post","status-publish","format-standard","hentry","category-market-commentary","category-market-performance"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p7kXxe-1Jz","jetpack-related-posts":[{"id":6784,"url":"https:\/\/schenkelberg.investments\/?p=6784","url_meta":{"origin":6669,"position":0},"title":"US vs International","author":"J.J. Schenkelberg, CFA","date":"October 10, 2024","format":false,"excerpt":"IndexThird Quarter 2024Year\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 To-Date 2024S&P 5005.5%20.8%Dow Jones Industrial Average8.2%12.3%Russell 20009.2%10.0%\u00a0\u00a0MSCI All Country World Index ex-US7.7%13.8%\u00a0\u00a0Aggregate Bond5.2%4.6% Performance Source: Koyfin Price Return U.S. Versus International The S&P 500 Index, an index of large U.S. companies, posted a price return of 5.5% for the Third Quarter of 2024. Large U.S. stocks underperformed\u2026","rel":"","context":"Similar post","block_context":{"text":"Similar post","link":""},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":6558,"url":"https:\/\/schenkelberg.investments\/?p=6558","url_meta":{"origin":6669,"position":1},"title":"Market Update – Second Quarter 2021","author":"J.J. Schenkelberg, CFA","date":"July 6, 2021","format":false,"excerpt":"U.S. Versus International The S&P 500, an index of large U.S. companies, posted a total return of 8.2% for the Second Quarter of 2021. This performance almost matched the first quarter for a year-to-date return of 14.4%. U.S. stocks outperformed international again for the quarter as measured by the iShares\u2026","rel":"","context":"In "Market Commentary"","block_context":{"text":"Market Commentary","link":"https:\/\/schenkelberg.investments\/?cat=119"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/schenkelberg.investments\/wp-content\/uploads\/2021\/07\/image.png?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":6503,"url":"https:\/\/schenkelberg.investments\/?p=6503","url_meta":{"origin":6669,"position":2},"title":"Hindsight is 20\/20","author":"J.J. Schenkelberg, CFA","date":"January 14, 2020","format":false,"excerpt":"Wow, what a year! Not much to complain about when it comes to investment returns for 2019. All major diversified stock indices advanced over 20%. The Standard and Poor\u2019s 500 Index led the way with a 29.7% total return. Technology stocks were the clear winners once again, with iShares S&P\u2026","rel":"","context":"In "Market Commentary"","block_context":{"text":"Market Commentary","link":"https:\/\/schenkelberg.investments\/?cat=119"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":6571,"url":"https:\/\/schenkelberg.investments\/?p=6571","url_meta":{"origin":6669,"position":3},"title":"Market Update – Third Quarter 2021","author":"J.J. Schenkelberg, CFA","date":"October 15, 2021","format":false,"excerpt":"U.S. Versus International The S&P 500, an index of large U.S. companies, posted a total return of 0.6% for the Third Quarter of 2021. S&P 500 performance was driven by strength in select stocks with large weights in the index. U.S. stocks outperformed international again for the quarter as measured\u2026","rel":"","context":"In "Market Commentary"","block_context":{"text":"Market Commentary","link":"https:\/\/schenkelberg.investments\/?cat=119"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":6646,"url":"https:\/\/schenkelberg.investments\/?p=6646","url_meta":{"origin":6669,"position":4},"title":"Market Update. 3rd Quarter 2022","author":"J.J. Schenkelberg, CFA","date":"October 18, 2022","format":false,"excerpt":"IndexThird Quarter 2022Year\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 To-Date 2022S&P 500-5.3%-24.8%Dow Jones Industrial Average-6.7%-21.0%Russell 2000-2.5%-25.9%\u00a0\u00a0MSCI EAFE (International Index)-10.4%-27.2%\u00a0\u00a0Barclays Aggregate Bond-4.6%-14.5% Performance Source: Koyfin U.S. Versus International The S&P 500, an index of large U.S. companies, posted a total return of -5.3% for the Third Quarter of 2022. U.S. stocks outperformed international for the quarter as\u2026","rel":"","context":"In "Market Commentary"","block_context":{"text":"Market Commentary","link":"https:\/\/schenkelberg.investments\/?cat=119"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":6549,"url":"https:\/\/schenkelberg.investments\/?p=6549","url_meta":{"origin":6669,"position":5},"title":"Market Update – First Quarter 2021","author":"J.J. Schenkelberg, CFA","date":"April 12, 2021","format":false,"excerpt":"U.S. Versus International The S&P 500, an index of large U.S. companies, posted a total return of 8.1% for the First Quarter of 2021. U.S. stocks outperformed international for the quarter as measured by the iShares MSCI EAFE ETF, a representation of international stocks outside the U.S. EAFE total return\u2026","rel":"","context":"In "Market Commentary"","block_context":{"text":"Market Commentary","link":"https:\/\/schenkelberg.investments\/?cat=119"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=\/wp\/v2\/posts\/6669","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6669"}],"version-history":[{"count":1,"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=\/wp\/v2\/posts\/6669\/revisions"}],"predecessor-version":[{"id":6673,"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=\/wp\/v2\/posts\/6669\/revisions\/6673"}],"wp:attachment":[{"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6669"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6669"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6669"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"](\"https:\/\/i0.wp.com\/schenkelberg.investments\/wp-content\/uploads\/2023\/01\/image-3.png?resize=829%2C319&ssl=1\")
<\/figure>\n\n\n\n![\"\"](\"https:\/\/i0.wp.com\/schenkelberg.investments\/wp-content\/uploads\/2023\/01\/image-4.png?resize=420%2C483&ssl=1\")
<\/figure>\n\n\n\n![\"\"](\"https:\/\/i0.wp.com\/schenkelberg.investments\/wp-content\/uploads\/2023\/01\/image-5.png?resize=825%2C318&ssl=1\")
<\/figure>\n\n\n\n