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Mosaic Weekly Article 05.19.2023

May 19, 2023

It appears that we are slowly moving closer to some type of resolution on the impending debt ceiling concerns. Members from both parties along with the President showed a unified front on Tuesday in echoing each side’s wish to get a deal done sooner than later. House speaker McCarthy sounded even more optimistic on Thursday saying that a deal could be reached in time to hold a first vote on the topic as soon as next week. This marks a sharp contrast to the rhetoric we have been hearing in the run up to the deadline. Our financial markets responded favorably to these tidbits with a relatively quiet week. One of our favorite indicators to watch, the VIX, has even moved below 17 (the normal range is 12 -20) indicating that the so called “fear and uncertainty” in our stock markets is quieting down. As a reference point, the VIX indicator sat at 23 to start the year, so things have been quieting down as the year has gone on. There is still much work to be done, however, before a deal can be reached but we welcome this news, and the direction things appear to be headed in.

More corporate earnings were reported over the week with particular interest being paid to the retail sector. This is always interesting as it generally relates directly to the “health” of the consumer and spending patterns. Both Target and Walmart reported better than expected results with strength coming from the grocery and online segments. The grocery segment makes sense given the elevated levels of inflation that have lingered and subsequent strong profit margins. Walmart even went as far as to raise its outlook for the remainder of the year which is a bit surprising. It begs the question; Are consumers really that healthy from a cash flow perspective? Have increased prices simply become part of our new normal? There is no doubt that we have been accustomed to sub 2% annual inflation increases over the last 10+ years, but I have to believe that continued and persistent high costs will come at an expense. A simple near-term explanation may just be that Wall Street analysts had become overly conservative in their outlook for the consumer. As Steven in our office often says, “don’t underestimate the savings we have all seen from refinancing our mortgages over the last few years.” Perhaps that statement continues to ring truer than we think or remember.

Today marks the start of the 49th G7 meeting in Hiroshima, Japan. The Russian/Ukraine war and the current state of world politics are certain to be hot topics for discussion. Ukrainian President Zelensky is expected to show up in person to increase the support for his nation and people. It's hard to think that the Russian invasion took place more than 15 months ago. With many other "bad actors" on the international stage, finding a truly peaceful path forward remains difficult. The lingering effects of the Covid pandemic only exacerbates things while the world still recovers. More than ever, there is a need for global cooperation on a variety of political and economic fronts. There will undoubtedly be pressure on President Biden to calm any worries expressed by our trading partners and allies regarding the state of our current economic situation. In many ways, the global economy still depends on the American consumer, so any significant slowdown on our part would be felt beyond our borders. A heavy burden to bear, but as I have said before and will reiterate, this is a challenge I know we are capable of overcoming. Never underestimate the U.S.A.!

Have a wonderful weekend.

https://www.cnbc.com/2023/05/12/good-news-for-markets-next-week-everyone-agrees-the-debt-ceiling-x-date-is-not-here-yet.html

https://www.cnbc.com/2023/05/18/walmart-wmt-q1-2024.html

https://www.cnbc.com/2023/05/18/mccarthy-says-house-could-vote-on-debt-ceiling-deal-as-soon-as-next-week.html

https://en.wikipedia.org/wiki/49th_G7_summit´╗┐

Christopher E. WassonCFP®

President

 Mosaic Asset Partners, LLC

                 1122 Kenilworth Drive, Suite 310

                 Towson, MD  21204

                 410.821.0089         fax 410.821.5993

                 MosaicAssetPartners.com  

                 

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The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.