This Weekly Financial Markets Update reviews the top market headlines: Business Surveys Reflect Weaker Activity, Slowdowns in Hiring and Wage Growth, Fed Minutes Signal Higher Rates

Top Three Market Headlines

Business Surveys Reflect Weaker Activity: A pair of closely-watched surveys of business executives released last week signaled weakening business conditions across the U.S. economy. The Institute for Supply Management (ISM) Manufacturing index registered 48.4% in December, a decrease from 49.0% the prior month. This was the second consecutive month the index pointed to contracting business activity (i.e., a sub-50% reading), after having previously reflected expansion for 39 straight months. The ISM Services index followed the same trend, dropping to 49.6% from 56.5% in November. This was the first sub-50% reading for the services index since May of 2020.

Slowdowns in Hiring and Wage Growth: The Labor Department reported last week that U.S. nonfarm payrolls rose in December by 223,000, down from a pace of 256,000 in November and the lowest monthly gain since December of 2020. Many of the employment gains over the last month occurred in the leisure & hospitality and health care industries. Wage pressures eased modestly, as average hourly earnings rose 0.3% from a month earlier and 4.6% on an annual basis, both down from the prior month. Meanwhile, the unemployment rate ticked down to 3.5% from 3.6% in November; this figure has hovered in a tight range of 3.5% to 3.7% since March of last year.

Fed Minutes Signal Higher Rates: Minutes released last week of the Federal Reserve's latest meeting in December indicated that the Fed intends to keep interest rates higher to fight inflation and does not anticipate cutting rates in 2023. At the meeting, Fed officials raised the target benchmark federal-funds rate by 50 basis points to a range of 4.25% to 4.5%, the highest since 2007. Minutes highlighted that the Fed is set on bringing inflation back down to 2% even if there needs to be softening in the job market and economic growth. Chairman Jerome Powell commented about the tight labor market and signaled that higher unemployment could be needed to bring back stability in prices.

As of January 09, 2023 Week Quarter-To-Date Year-To-Date One-Year
MSCI All Country World 2.00% 2.00% 2.00% -15.53%
S&P 500 1.47% 1.47% 1.47% -15.68%
Russell 2000 1.81% 1.81% 1.81% -17.57%
MSCI EAFE 2.68% 2.68% 2.68% -11.68%
MSCI Emerging Markets 3.39% 3.39% 3.39% -16.38%
FTSE NAREIT Equity 1.71% 1.71% 1.71% -21.22%
Bloomberg Commodity -4.08% -4.08% -4.08% 9.57%
Barclays U.S. Aggregate 1.85% 1.85% 1.85% -10.27%

Bloomberg 1/4/2023, ISM 1/4/2023, WSJ 1/6/2023, Bureau of Labor Statistics 1/6/2023, Federal Reserve 1/4/2023. Data from Morningstar Direct. Returns for periods greater than one year are annualized. Gallagher Fiduciary Advisors, LLC ("GFA") is an SEC Registered Investment Adviser that provides retirement, investment advisory, discretionary/named and independent fiduciary services. GFA is a limited liability company with Gallagher Benefit Services, Inc. as its single member. GFA may pay referral fees or other remuneration to employees of AJG or its affiliates or to independent contractors; such payments do not change our fee. Securities may be offered through Triad Advisors, LLC ("Triad"), member FINRA/SIPC. Triad is separately owned and other entities and/or marketing names, products or services referenced here are independent of Triad. Neither Triad, Arthur J. Gallagher & Co., GFA, their affiliates nor representatives provide accounting, legal or tax advice.