It has been a wild first quarter, and for the last three months we’ve been talking about all of the early indicators of potential economic slowdown. There’s been spike in oil prices like we have never seen. The yield curve inverted, and we’ve seen an aggressive Fed. These are all things that have been in the media, and we hear talked about that are concerning. However, when it comes down to it, it’s very hard for the economy to dip into a recession or slow down in any extreme way when we are adding jobs. In the month of March, we added 431,000 jobs month-over-month, which is a phenomenal number. If you look at the chart shown in this episode, we’re nearly back to where we were pre-COVID. If you compare March of 2022 to February of 2020, we’re only 1.57 million jobs shy. That shows we’ve made massive improvements, but it also shows that there’s still room to run. This economy hasn’t necessarily over heated, and we still have more jobs to add. In the leisure and hospitality sectors, where there’s been the most weakness, traditionally has also had the quickest lag time between openings and rehiring. That means there’s a lot of jobs out there that can be filled, we just need people to want to go to work. There are an estimated 11 million job openings and roughly 6 million people unemployed. If the Labor market stays this tight and this strong, with year over year earnings up 5.6%, it’s hard to see how we dip into a recession when people are working, getting paid to work, saving money, and staying employed. We need to see the strength continue, but it’s very good to see as we come into the second quarter.
Stocks have rallied back nicely over the past couple of weeks with the S&P 500 up more than 10% from the March 14th low. While some suggest that the market is sniffing out a potential compromise to end Russia’s invasion of Ukraine, and that’s certainly possible, but in our opinion that’s not the whole story. It’s our opinion that corporate profits might be another element of the bulls thinking and driving the latest rebound in the market. Not only are US earnings estimates holding up in the face of war overseas, and in the highest inflation in 40 years, but also, as you can see in the chart shown in this episode, estimates for the S&P 500 Index earnings per share for the next four quarters are actually up in March. The US stands out globally with a favorable earnings outlook. Right now, the US profit outlook is the envy of the world. This is important and a particularly good place to be if companies close the books on first quarter and as first quarter earnings season approaches. This is why our investment strategies are heavily weighted towards US equities. It is the best place to be in right now.
It has been said that a bull market climbs a wall of worry and one of those worries right now is gas prices. Last week, President Biden talked about the possible drawdown of one million barrels a day from the Strategic Petroleum Reserves. If he does that for the 180 days that he mentioned, that’s going to be a 30% drawdown of our reserves, which would bring us near record lows. Those will eventually have to be replenished, however, one thing that we’ve seen that kind of counteract gas prices, along with tapping into our own reserves, has been individual states are starting to implement tax cuts. In a chart shown in this episode, you will see that Maryland and Georgia have already implemented a tax cut. At first lot of people worried that about the tax cuts passing through to the consumer and as you can see, it did very well. Connecticut’s tax cuts went into effect on Friday and now there’s even talk from both sides of the political parties that maybe we should implement a federal gas tax cut for the remainder of the year to see what happens. There are some things on the table to hopefully get gas prices down just in time for people to travel.
Greg Powell, CIMA®
President and CEO
Email Greg Powell here
Bobby Norman, CFP®, AIF®, CEPA®
Email Bobby Norman here
Trey Booth, CFA®, AIF®
Chief Investment Officer
Email Trey Booth here
Associate Vice President
Email Ty Miller here
Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Economic forecasts set forth in this presentation may not develop as predicted.
No strategy can ensure success or protect against a loss.
Stock investing involves risk including potential loss of principal.
Securities and advisory services offered through LPL Financial, Member FINRA/SIPC and a registered investment advisor.
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