After three turbulent years that have included a worldwide pandemic, subsequent government interventions, supply chain disruptions, wars, and rising interest rates, the US economy is holding in a steady state of reasonable stability. The aggressive Federal Reserve rate increase campaign that started in 2022 and continues in 2023 has negatively impacted the credit, lending, and bond markets. This time it's not a disruption of merchandise but of capital. Businesses and individuals are shocked at lending costs, with interest rates now up 200% or more from Q1 2022.
The impact has been significant for developers of multi-million-dollar developments to individuals buying a single-family home. The result is and will continue to be a slowdown of all levels of economic activity until incomes and available capital increase to offset the rise in lending costs. So far, the impact on the labor market has been mild, with wages leveling off as more workers are applying for jobs and the unemployment rate still remains at 40-year lows.
The S&P 500 has remained in a positive uptrend since October 11, 2022. Investors are comforted with the absence of wild market volatility even during the past couple of weeks when investors feared the possibility of another banking crisis.
The S&P 500 is up 4.54% YTD and slightly above its 20, 50, and 200 Day Moving Averages (DMA).