BLISTERING PACE

During the Civil War, the Union placed a blockade on Confederate ports. In August 1864, David Farragut was given the task of closing the port at Mobile, Alabama, which had defied the order.

When Farragut ordered his fleet to proceed, one of the ships hit a mine and sank, causing the rest of the fleet to hesitate. However, Farragut was undeterred and famously exclaimed, “Damn the torpedoes! Four bells! Captain Drayton, go ahead! Jouett, full speed!”.

Today’s economy has a similar ring to it. Despite higher interest rates and higher inflation, it’s a “damn the torpedoes, full speed ahead” economy.

Last week’s GDP number reflected such brashness. The U.S. Bureau of Economic Analysts (BEA) reported that Q4 Gross Domestic Product (GDP), the largest measure of goods and services, expanded at an annual pace of 3.3%, easily topping the 2.0% forecast (Investor’s Business Daily).

Across the board, internal metrics were upbeat, including consumer spending, which accounts for just under 70% of GDP.

Though we’ve heard that consumers are shifting away from goods and toward experiences/services/entertainment, the data suggest otherwise.

The table below summarizes the Federal Reserve’s December 2022 forecast. Despite sharp rate hikes, the data has been better than expected. GDP exceeded a weak forecast, the unemployment rate held below 4%, and the inflation rate fell faster than expected.

Investors have benefited from robust economic growth, which supports corporate profits, while the slowdown in inflation has kept interest rates in check.

MARKET SUMMARY

TWO FOR THE ROAD

1. In the late 1970s, roughly 70% of U.S. imported oil came from OPEC. That was down to about 15% at the end of 2022. – Axios, January 18, 2024

2. Unemployment has now been under 4% for almost two years- the longest streak of rock-bottom jobless rates since the Vietnam War. – NPR, January 5, 2024

Source:

https://www.stordahlcap.com/insights/the-week-in-review-january-29-2024-556hn-dx4yb-htjr8-n3r3j-hwlsp-ttshr-6yss4-jmxls-hwk64-gpygh-jnndb-68mh7