2022 | January 23

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The Market

Stocks Fall

The S&P 500 and the Dow sustained their first negative week of 2023 amid mixed earnings results, big layoff announcements from major technology companies, and concern about the prospect of a recession. The Dow’s weekly drop of 2.7% was far steeper than the 0.6% decline for the S&P 500; in contrast, the NASDAQ finished up 0.6%.

For the second week in a row, a U.S. large-cap growth stock benchmark outperformed its value counterpart by a wide margin, reversing the trend from 2022, when the value equity style dominated. Over the past two weeks, the growth benchmark gained 4.4% while its value counterpart added 0.3%.

Entering the peak of earnings season, analysts have been scaling back their forecasts for results from the first half of 2023. In recent weeks, earnings expectations for this year’s first and second quarters switched from year-over-year growth to declines for companies in the S&P 500, according to FactSet. For the fourth-quarter 2022 results being released in the current earnings season, analysts expected a decline of around 4.6% as of Friday.

Partisan brinkmanship in Washington D.C. over the nation’s debt ceiling aggravated the sense of anxiety for investors. Democratic and Republican leaders remained at odds over fiscal issues, and the U.S. Department of the Treasury on Thursday began taking special accounting measures to meet debt obligations and prevent a potential default—at least for now.  

By one measure, the inversion of the yield curve for U.S. government debt recorded its biggest gap on record. As of Friday, the yield of the 10-year U.S. Treasury bond was around 3.48% compared with 4.66% for the 3-month bill—a negative spread of 118 basis points. Prior to this year, a negative spread had never been more than 100 points, according to U.S. Federal Reserve data going back to 1982. 

The final month of the holiday shopping season didn’t provide a catalyst for the broader U.S. economy, as retail spending in December fell at a worse-than-expected pace of 1.1%. That result slightly lagged November’s 1.0% decline and was the worst monthly result of 2022 on a seasonally adjusted basis.

Despite inflationary pressures, Japan’s central bank maintained ultra-low interest rates, including its 0.5% cap for the yield of its 10-year bond. The Bank of Japan’s decision defied market expectations, and a Japanese stock index rose 2.5% in the wake of Wednesday’s decision. 

Thursday’s scheduled release of the government’s initial estimate of fourth-quarter GDP is expected to show that the economy recorded its second consecutive quarter of positive growth, indicating a recovery from the negative results recorded in early 2022. In the third quarter, GDP rose at an annual rate of 3.2%; for the fourth quarter, most economists expect a modest slowdown from that growth rate. 

Source: John Hancock Investment Management

Beneficiary Designations

When was the last time you talked with your parents/kids about money?

It still surprises many people that the oldest millennials are in their mid-40s, but it’s true. Millennials have been rapidly moving into sandwich generation territory – where they may need to provide care for older parents and school-age children at the same time.

Caring for aging parents can be an expensive responsibility. One often overlooked cost is that adult children may have to work fewer hours or take leave from work to care for a loved one. On average, the cost of lost work time for caregivers is more than $10,000 a year, according to AARP Research. Take this brief quiz to learn more about the costs typically associated with caregiving.

1. About 48 million Americans provided unpaid care to an adult family member or a friend in 2021. In addition to the emotional costs of caregiving and lost income, most (8/10) caregivers spent a significant amount of money on caregiving costs such as home modifications, medical bills and parents’ rent or mortgage payments. On average, annual caregiving costs more than:

a. $3,000

b. $7,000

c. $9,000

d. $11,000

2. In a recent survey, 70 percent of respondents said their parents were financially prepared for the future. How many of the survey’s respondents had actually talked with their parents about whether the parents were financially prepared for the future?

a. 31 percent

b. 42 percent

c. 65 percent

d. All of them

3. Sometimes, care may be needed for a significant period of time. The average life expectancy at birth in the United States is 76.1 years, but life expectancy changes as people age. What is average life expectancy at age 70?

a. 6.5 years

b. 8.7 years

c. 12.1 years

d. 14.8 years

4. Talking about money with parents can be difficult. In a recent survey, many participants said they would rather not do it. In fact, they would rather:

a. Discuss their parents’ funeral plans than their parents’ finances.

b. Inherit less rather than deal with their parents’ finances.

c. Deal with a parent’s estate after death rather than talk about it while the parent was alive.

d. All of the above.

Whether caregiving is in your future or not, it’s important for adult children to understand their parents’ current finances and the plans they have for future. If you would like to have some help getting the ball rolling, just let us know. We can guide and facilitate these important financial conversations.

Answers: 1) b ; 2) b; 3) d; 4) d

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