Stock Market This Week – 01/28/23

Stock Market This Week

Stock Market This Week – 01/28/23

The stock market had another positive week, despite persistent recession fear. Notably, the Personal Consumption Expenditures (PCE) Price Index fell further to 5.5%, below expectations. The core reading was 4.4%. For perspective, the PCE peaked at 10.6% in June 2022. Seemingly, the U.S. Federal Reserve’s draining of fiscal stimulus from the economy is working. The bottom line is lower inflation is a plus for the U.S. and global economies.

As shown by data from Stock Rover*, all the major indices had positive returns. The Nasdaq led the way, followed by the S&P 500 Index, Russell 2000, and the Dow Jones Industrial Average (DJIA). The Dow 30 performed the worst again, continuing a turnaround of last year’s trends. Oil and the VIX both fell. The VIX is near its long-term average.

Nine of the eleven sectors posted gains for the week. The Consumer Cyclical sector led the way, followed by Technology and Communication Services. Conversely, the worst-performing indices were Utilities and Healthcare.

The Nasdaq is performing the best for the year, followed by the Russell 2000. But all the major indices are up. In addition, all 8 of the 11 sectors are up year-to-date. Only more defensive sectors, like Healthcare, Utilities, and Consumer Defensive, were down.

The dividend growth investing strategy has performed relatively well, with positive returns. The table below shows their performance by category. All categories are now in positive territory.

Dividend Increases and Reinstatements

Search for a stock in the list of dividend increases and reinstatements. This list is updated weekly. In addition, you can search for your stocks by company name, ticker, and date.

Dividend Cuts and Suspensions List

The dividend cuts and suspensions list was most recently updated at the end of January 2023. As a result, the number of companies on the list has risen to 610. Thus, well over 10% of companies that pay dividends have cut or suspended them since the start of the COVID-19 pandemic. The list is updated monthly.

Eight new additions indicate companies are starting to experience headwinds in January 2023.

Stock Market Valuation This Week

The S&P 500 Index is trading at a price-to-earnings ratio of 21.76X, and the Schiller P/E Ratio is about 29.57X. These multiples are based on trailing twelve months (TTM) earnings.

The long-term means of these two ratios are approximately 16X and 17X, respectively. 

The market is still overvalued despite the recent correction and a bear market and rebound. Earnings multiples of more than 30X are overvalued based on historical data.

Stock Market Volatility This Week – CBOE VIX

This past week, the CBOE VIX measuring volatility ended at 18.51. The long-term average is approximately 19 to 20. The CBOE VIX measures the stock market’s expectation of volatility based on S&P 500 Index options. It is commonly referred to as the fear index.

Economic News This Week

Provided by Stock Rover*.

The Commerce Department’s first estimate on fourth-quarter gross domestic product (GDP) growth reported the economy expanded at an annual rate of 2.9%. The first estimate is slightly down from the 3.2% growth reported in the third quarter. Increases in private inventory investment, consumer spending, federal government spending, state and local government spending, and nonresidential fixed investment contributed to the rise. Business inventories added a significant 1.46 percentage points to the growth. Consumer spending, which makes up nearly two-thirds of the economic activity, grew 2.1%, decelerating from 2.3% in the third quarter. Government spending rose 3.7% for the second straight month. Federal expenditures jumped 6.2%, and state and local purchases increased by 2.3%. Partly offsetting the increases were declines in residential fixed investment (-26.7%) and exports (-1.3%). Imports, which are a subtraction in the calculation of GDP, decreased (-4.6%). Housing construction and renovation plummeted (-26.7%) and followed a (-27.1%) drop in the previous quarter, marking the seventh straight quarterly decline. The GDP increased by 2.1% for all of 2022 compared to 5.7% across 2021, which was the fastest pace since 1984.

The U.S. Census Bureau reported that new orders for durable goods jumped 5.6% to $286.9B in December. This follows a (-1.7%) drop in November. When transportation is excluded, “core” durable goods orders fell (-0.1%). Orders for transportation equipment climbed sharply (+16.7%) to $108.1B in December after dropping (-5.0%) in November. Orders for non-defense/civilian aircraft rose (+115.5%) in December after plummeting (-30.7%) the previous month. Increases in orders for electrical equipment, appliances, and components (+1.9%) were more than offset by a drop in orders for machinery (-0.9%) and computers and electronic products (-0.6%). Orders for non-defense capital goods, excluding aircraft, a proxy for business spending plans, decreased (-0.2%) in December. Orders for non-defense capital goods, excluding aircraft, are up (+8.3%) year over year. Shipments of core capital goods dropped (-0.4%) after declining (-0.2%) in November.

The Bureau of Economic Analysis reported that core PCE (personal consumption expenditures) fell for the third month and its lowest level since October 2021. The December core PCE, which excluded food and energy prices, increased (+4.4%) from a year ago, down from (+4.7%) in November. On a monthly basis, core PCE rose (+0.3%). The headline PCE, which includes food and energy prices, increased (+5.0%) from a year ago, down from a (+5.5%) reading in November. On a monthly basis, PCE rose (+0.1%). On an annual basis, goods inflation increased by (+4.6%), a significant drop from the (+6.1%) reading in November, while services inflation held at (+5.2%). While personal income increased (+0.2%) in December, consumer spending, which accounts for more than two-thirds of U.S. economic activity, declined (-0.2%). November was revised to show spending decreasing (-0.1%) rather than gaining (+0.1%). Adjusted for inflation, spending fell (-0.3%) in December.

Curated Weekend Reading From Around The Web

Portfolio Management and Investing

• After A Timeout, Back to the Meat Grinder (Jerry Grantham, Seeking Alpha)
• FOMO: The Worst Financial Trait (Morgan Housel)
• Is It Realistic to Have 100% of Your Portfolio in Stocks (A Wealth of Common Sense)

Retirement

• Strategic asset allocation will outlive this market (Vanguard)
• Should We Listen to Outperforming Fund Managers? (Behavioural Investment)
• The Role of Real Estate Investments in a Portfolio (Morningstar)

Financial Independence

• The Most Important Variables in the FIRE Equation (Physician on FIRE)
• When Money Doesn’t Look Like Money (Tedium)
• Elevate (Banker on FIRE)