The Week in Review: January 22, 2024

Waiting on the Long-Awaited Soft Landing

Economists have warned for quite some time that Fed rate hikes will slow economic growth. Whether it results in a soft landing, the preferred outcome for investors, or a hard landing (recession), the rate hikes would be expected to blunt economic activity, at least to some degree.

However, much of the recent economic data suggests that the economy continues to expand steadily.

For example, retail sales have been upbeat through December—Figure 1.

Retail sales are released monthly by the U.S. Census Bureau. The data are adjusted for seasonality, such as Christmas, but not adjusted for inflation. Using the Consumer Price Index for Goods, a subcomponent of the CPI, we can subtract out the monthly change in total retail sales and approximate inflation-adjusted sales (excluding the effect of a change in prices).

Sales have been up in seven of the last eight months. Increases have topped or matched 0.5% in five of the last eight and three of the last four months (Figure 1).

Consumers are spending amid job growth and modest increases in wages.

Through December, there’s little evidence to suggest that higher prices or economic anxieties are discouraging shoppers or confirming talk that shoppers favor experiences/travel over goods.

Among the price-hike leaders, restaurants haven’t discouraged most folks from eating out, as sales are topping inflation over the period surveyed—Figure 2. When economic storm clouds gather, we’d expect dining out to take a back seat to saving money.

We’ll get a clearer economic picture when the Q4 Gross Domestic Product is released this week. On Friday, the S&P 500 Index eclipsed its early 2022 high and closed at a record (see table of returns).

Market Summary

Please do not hesitate to contact me with any questions or concerns.  I hope you have a wonderful week!

Bill Stordahl, CFP®
Managing Director
Stordahl Capital Management

Stordahl Capital Management, Inc is a Registered Investment Adviser. This commentary is solely for informational purposes and reflects the personal opinions, viewpoints, and analyses of Stordahl Capital Management, Inc. and should not be regarded as a description of advisory services or performance returns of any SCM Clients. The views reflected in the commentary are subject to change at any time without notice. Nothing in this piece constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Advisory services are only offered to clients or prospective clients where Stordahl Capital Management and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Stordahl Capital Management unless a client service agreement is in place. Stordahl Capital Management, Inc provides links for your convenience to websites produced by other providers or industry-related material. Accessing websites through links directs you away from our website. Stordahl Capital Management is not responsible for errors or omissions in the material on third-party websites and does not necessarily approve of or endorse the information provided. Users who gain access to third-party websites may be subject to the copyright and other restrictions on use imposed by those providers and assume responsibility and risk from the use of those websites. Please note that trading instructions through email, fax, or voicemail will not be taken. Your identity and timely retrieval of instructions cannot be guaranteed. Stordahl Capital Management, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.

1. The Dow Jones Industrials Average is an unmanaged index of 30 major companies which cannot be invested into directly. Past performance does not guarantee future results.
2. The NASDAQ Composite is an unmanaged index of companies which cannot be invested into directly. Past performance does not guarantee future results.
3. The S&P 500 Index is an unmanaged index of 500 larger companies which cannot be invested into directly. Past performance does not guarantee future results.
4. The Global Dow is an unmanaged index composed of stocks of 150 top companies. It cannot be invested into directly. Past performance does not guarantee future results.
5. CME Group front-month contract; Prices can and do vary; past performance does not guarantee future results.
6. CME Group continuous contract; Prices can and do vary; past performance does not guarantee future results.