Never arm wrestle a softball pitcher. My high school sophomore, who’s been “hitting the gym,” learned this lesson. They are stronger than you expect. Last week’s gross domestic product (GDP) was stronger than analysts expected too.

The Bureau of Economic Analysis (the champion of the lamest name) released the GDP report for the final three months of 2022 on January 26, 2023. According to the Wall Street Journal, the US economy was positive and beat analyst forecasts by nearly 12%.

Even though the GDP slowed down from the prior three months, it was enough to push 2022 into positive territory after a negative first half. The US economy is showing some fight, even against strong inflation and rising Federal Reserve interest rates.

Most analysts agree that the push behind the market is companies buying to rebuild inventories, consumer spending, and government spending at all levels. One notable exception was that residential home investment dropped 26.7% as home sales struggled against surging mortgage rates.

I still think the US will see a mild and short-lived recession in the early-to-middle part of 2023. The market probably has already reached its low point in this cycle, but a mild recession could affect the job front and cause more layoffs and lower incomes.

Our economy hasn’t yet felt the full impact of the Fed’s rate hikes. So I don’t think they need to raise rates further; however, they’re expected to increase rates in the next two meetings at a 0.25% clip and then stop sometime this spring, which could spark the stock market to climb.

Several analysts forecast the Fed actually cutting interest rates in the last half of this year because of the resilience of the US economy. The US consumer is strong.

My son soon learned to avoid arm wrestling the mighty right hand of his softball pitching sister until his weight training kicked in. He defeats her now, but his sister is stronger than he expected. I think our economy is too.

Have a blessed week!


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