Portfolio watch
Mechanics Bank Wealth Management challenges the conventional wisdom of a slowing economy in its latest weekly update. And that wisdom also has held that the Fed would “pause their cycle of rate hikes” as early as this winter. But the December employment report shattered that view and now the extraordinary level of job creation “is going to make the Fed apprehensive” about easing too soon. It now forecasts rate hikes in March and May even though the 500,000-plus job gain may be a “rogue report due to seasonal factors” that will be revised downward. A pause perhaps, but don’t look for the Fed to cut rates in 2023, Mechanics advises.
Non-U.S. stocks have been on a roll, writes Mitch Zacks of Zacks Investment Management. In the three months ending January 31, the MSCI ACWI ex-U.S. index has risen over +18%, while the S&P 500 index edged up around 4%. “Foreign stocks widely underperformed U.S. stocks in the last bull cycle,” he writes raising questions about whether the rise in foreign stocks will be more than just a 90-day trend. One factor is that the dollar has weakened substantially, making foreign currency factors more attractive for non-dollar issues; whether dollar weakness will last as the Fed takes a hard line on inflation could impact markets.
Three companies have joined the S&P 500 Aristocrats, a group now numbering 67 companies that have raised their dividend for at least a quarter-century. The newcomers are jam and jelly maker J.M. Smuchker, logistics firm C.H. Robinson Worldwide and Nordson, a maker of coatings and sealings. According to reporting in Barron’s, there were no deletions this year and the Aristocrats posted a negative 6% in 2022 versus an 18% drop in the S&P 500 itself. Existing members include Johnson & Johnson, Chevron, Target, Walmart and Colgate-Palmolive.
