For a short week punctuated by President’s Day, there was no shortage of news or volatility. It was as if investors crammed a full five days into just four this week. The markets continue to wrestle with persistent inflation as the economic data this week suggests things aren’t slowing as much or as fast as had been hoped. And yet, as noted last week, what would otherwise be considered good news has the adverse effect of causing fear and expectations of further Federal Reserve tightening. If, as a child, you have had the experience of riding a seesaw, this is what the market feels like these days. Expect further ups and downs in the weeks ahead.
Remember how I mentioned consumer spending in December was well below expectations? This news was announced around the time earnings announcements were reported, explaining why earnings for the fourth quarter last year were subpar. Well, we learned this week that consumer spending in January was well above expectations perhaps driven by the astounding jobs report in the same month. Sentiment is rising, as is retail spending, which implies people are both feeling a little better about their prospects and perhaps indicates raises and new jobs are allowing for spending to continue unabated. Personal income was led by an increase in compensation, reflecting private wages and salaries in both the services-producing and goods-producing industries. Consumer spending rose $312B in January, split almost equally between goods and services. On the goods side, spending was led by motor vehicles and oddly pharmaceuticals, while on the services side, it was almost exclusively driven by food services.
In other news, Fidelity answered the question that no one was asking. How bad was 2022 for retirement accounts? The answer was pretty awful (in case you didn’t already know). According to an analysis of the 401k’s on its platform, the average balance finished the year down 23% to $103,900. Fidelity should know since it is the nation’s largest provider of retirement accounts with more than 43 million on its platform. Adding to the decidedly downtrodden news, Fidelity reported that 2022 ended with the lowest personal savings rate since 2005, while household debt climbed to its highest level in two decades. If you regularly read my weekly commentary, you’ll know these are two items I regularly lament.
In company news, Apple is reportedly working on a glucose monitoring system purportedly built into its Apple Watch that would be non-invasive. In a nutshell, it would forego the need to prick the skin for blood testing. If they can accomplish this task, I’d say there is a large market for such a product. On an unrelated story, Starbucks announced it is bringing olive oil to coffee. Apparently, CEO Schultz noticed the practice in Sicily where consumers sometimes drink olive oil alongside coffee. He figured why not combine the two? They’ve decided to name the drink “Oleato”, not to be confused with Olestra for those of you old enough to remember, although I wonder if the effect will be the same. I don’t know if this is truly “alchemy” as Mr. Schultz noted, or if it will be a “new game-changing platform” as he insists, but the idea of “golden foam” doesn’t make me want to run out and try one immediately. I’ll wait for the reviews. If you happen to try this new product, you’ll have to let me know how it tastes. And lastly, Nvidia had a great week, after announcing earnings that topped Q4 expectations. Apparently, AI is no joke as the CEO stated it is at an inflection point. Mercedes Benz even goes so far as to say that its advanced navigation system, powered by Google, will offer “super computer-like performance” in cars allowing for real-time and predictive traffic information as well as advanced autonomous driving capabilities. We are on the precipice of a new technological frontier. Buckle up.
In closing, I came across news of another viral phenomenon having consequences. No, it’s not the type of virus that causes illness. I’m talking about the drug called Ozempic which has been used to treat Type 2 diabetes since coming to market in 2017. However, one of its side effects is weight loss and you can guess where this is going. Videos on TikTok, regarding the medication’s use for weight loss, have a combined 785 million views. As more people use the drug for weight loss, diabetes patients are pharmacy-hopping to find stores that have Ozempic in stock, lowering their dosages to make their supplies last longer, and attempting to switch medications. The use of Ozempic has grown 69% this year, which is great for Novo Nordisk, the manufacturer of the drug, but not so great for Type 2 diabetics who rely on it for their health. Now you know.Bruce J. Mason, MBA