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Mosaic Asset Partners - Consumer Spending and Corporate Earnings Highlight The Week

January 19, 2024

The consumer appears to be holding up so far to start the year. Holiday shopping, overall, ended the year stronger than expected and some of that might be attributed to the overall rally we saw in our financial markets. Retail sales for December were 0.6% higher than the same month in 2022 and beat the expectations of 0.4%. On a year over year basis, consumer sales were higher by 5.6% in 2023. While this number does not adjust for inflation, it is evident that the consumer is “keeping up” with the overall increases in goods. The December report comes amid speculation about how much strength the U.S. economy possessed heading into the new year, when growth has been expected to slow. A continued resilient consumer could possibly give the Federal Reserve some caution about how to proceed on interest rates. Similar to our theme from last week’s letter, the evidence continues to mount that the Fed is likely to hold the interest rate line for some time. I would caution that the December data alone shouldn’t be enough to sway things. The data from January will be much more telling in my opinion as the typical holiday cheer subsides.

Corporate earnings are coming in fast and furious now as we run through the third week of the new year. It has been a very mixed bag of results so far with few big upside or downside surprises. There seems to be a lot of hesitancy by many of the larger companies to provide much in the way of forward-looking guidance as well. Perhaps the most common theme we are seeing is more use of the terms like cautionary spending, modest increases to growth, revisiting head count, etc. There have been additional layoff announcements in the technology sector in recent weeks and the help wanted signs seem to be less plentiful in this current environment. As any recent college grad can tell you, the prospect of an easy interview and hiring process is becoming increasingly difficult. It's true that companies have faced many challenges due to economic fragility, especially in the aftermath of the COVID-19 pandemic and changes in the interest rate environment. Many organizations have adapted by relying on their existing workforce to enhance productivity while lowering expenses. As the dust settles further and more clarity on just where the consumer’s mentality sits, the prospects for any significant changes on the job front are likely to be limited. I suspect this mind set will continually shift as more data points are revealed in the months ahead.

Down the road from us here in Baltimore, a short-term spending bill was approved by Congress on Thursday to keep things running in D.C. Now don’t get too excited. This is only a partial stopgap measure to keep things running through early March. In the most basic of terms, this amounts to the third version of a “kick the can” down the road game. While frustrating as it all may seem, at least both sides are talking and trying to work on a longer-term solution. I think it remains clear, however, that with an impending election ahead and much uncertainty in the air, each side of the aisle needs to show a good face to the American public. As always, the political chess match is in full swing with no signs of declaring a winner any time soon.

As the weather nationwide locks us inside this weekend, I hope you are able to enjoy a good read, TV show, or playoff football. With all of the choices we have in today’s environment there is sure to be something for everyone. Winter is fully upon us and while we search for the sunshine and more mild days, it’s ok to embrace the place we are in and settle down. At least my Ravens and Bucs are still in play!

Have a nice weekend.

https://www.cnbc.com/2024/01/17/retail-sales-december-2023.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Mail

https://www.cnbc.com/2024/01/17/biden-johnson-congress-supplemental-aid-meeting.html

https://www.cnbc.com/2024/01/18/senate-passes-stopgap-bill-to-prevent-a-shutdown-sending-it-to-the-house.html

Christopher E. Wasson, CFP®

President

Mosaic Asset Partners, LLC

1122 Kenilworth Drive, Suite 310

Towson, MD  21204

410.821.0089         fax 410.821.5993

MosaicAssetPartners.com          

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Mosaic Asset Partners, LLC is not affiliated with Kestra IS or Kestra AS.  Investor Disclosures: https://www.kestrafinancial.com/disclosures