Private Client Group

June 5th, 2023

Debt Ceiling Deal Reached, Chinese Resurgence Sputters, U.S. Median Age Rising

Share
Subscribe

In this week’s Steady Investor, we look at some of the current events that are shifting the market, such as:

Debt Ceiling Deal is Reached, But Government Spending Doesn’t Change Much – For weeks, Zacks Investment Management’s position has been that the U.S. government would reach an agreement to lift or suspend the debt ceiling, putting the hysteria over a potential default to rest. While the deal seemed likely to come at the 11th hour, there was not a tenable scenario where the U.S. would be allowed to default on its debts. Doing so benefits no one. By a bipartisan vote of 314 to 117, the House passed a bill last week to suspend the debt ceiling until January 2025 in exchange for spending cuts totaling $1.5 trillion over 10 years (according to the Congressional Budget Office). For those keeping score, $1.5 trillion over a decade is not a significant amount of money relative to total U.S. GDP or government spending, but there was also a provision limiting spending growth to 1% past 2025 (though this can be altered). On the “chopping block” for spending was an approximately $20 billion reduction in spending for bolstering the IRS and an official end to the Biden administration’s pause on student loan repayments. But taken together and thought of in aggregate, the trajectory of debt growth for the U.S. government is largely unchanged with the deal, and by some estimates would only reduce federal spending from its current baseline by about 0.2% of GDP over the next two years. The bill now heads to the Senate, where quick passage is expected.1

Explore the Do’s and Don’ts of Stock Market Volatility

Every investor understands the dread and anxiety of watching their investments take a turn when the market changes.

It is impossible to avoid volatility, but there are ways you can minimize the worst impacts of a volatile market. In our newest guide, ‘The Do’s and Don’ts of Stock Market Volatility’ we provide recommendations for investors, based on 30 years of expertise. We also explore simple and effective steps investors can take to successfully navigate market ups and downs.

If you have $500,000 or more to invest, get our free guide today!
 
Download Your Copy Today: The Do’s and Don’ts of Stock Market Volatility2

China’s Post- Zero-Covid Economic Resurgence Putters – Many expected that China’s end of zero-Covid would result in an economic surge much like the experience in the U.S. and Europe. In the early weeks and months following the end of restrictions, signs indicated it was a distinct possibility. But data has puttered since – China’s official purchasing managers index (PMI) for manufacturing activity fell to 48.8 in May, which indicates contraction. Services activity expanded, but we would note that May’s reading marked a deceleration from April, which indicates an overall slowing of activity. China faces many structural problems that to date have not been fully appreciated, like a faltering property boom, a very high youth unemployment rate, weaker-than-expected consumption, and strained relationships with Western countries. In recent months, for instance, there has been a tit-for-tat with prominent U.S. companies like Micron Technology over manufacturing in China, and many U.S. manufacturers are re-evaluating their presence in China altogether. Earlier fears of China quickly overtaking the U.S. as the largest economy in the world is abating, at least for now.3 

The Median Age in the U.S. Keeps Climbing, Posing Economic Challenges – Many developed countries around the world are facing a demographic problem, with aging populations and low birthrates. The U.S. is one of them – the number of babies born in the U.S. started falling 15 years ago, and it has not recovered in recent years. Economic problems stemming from the 2008 Global Financial Crisis are largely thought to have been at the root of the problem, but the economic recovery since has not brought with it an increase in births. In 2022, about 3.66 million babies were born in the U.S., which was flat from 2021 and is 15% below the peak reached in 2007. The result is an aging population – the median age in the U.S. was 35.2 in 2000, rising to 37.2 in 2010 and 39 according to 2022 U.S. Census Bureau data.4

Overcoming Market Volatility – Some investors tend to panic and sell out of the market when uncertainty sets in.

It is impossible to avoid volatility, but there are ways you can minimize the worst impacts of a volatile market. In our newest guide, ‘The Do’s and Don’ts of Stock Market Volatility’ we provide recommendations for investors, based on 30 years of expertise. We also explore:

If you have $500,000 or more to invest, get our free guide today!

Disclosure

1 NY Times. May 31, 2023. https://www.nytimes.com/2023/05/31/us/politics/debt-ceiling-house-vote.html

2 Zacks Investment Management reserves the right to amend the terms or rescind our free The Do’s and Don’ts of Stock Market Volatility offer at any time and for any reason at its discretion.

3 Wall Street Journal. May 31, 2023. https://www.wsj.com/articles/u-s-manufacturers-seek-china-alternatives-as-tensions-rise-3cf539fa?mod=djemRTE_h

4 Wall Street Journal. May 26, 2023. https://www.wsj.com/articles/why-americans-are-having-fewer-babies-3be7f6a9?mod=djemRTE_h

5 Zacks Investment Management reserves the right to amend the terms or rescind our free The Do’s and Don’ts of Stock Market Volatility offer at any time and for any reason at its discretion.

DISCLOSURE

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

Certain economic and market information contained herein has been obtained from published sources prepared by other parties. Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable. Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor’s. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor. An investor cannot invest directly in an index.
READ PREVIOUS
U.S. Avoids Debt Limit Catastrophe
READ NEXT
Mitch Zacks: What Debt Markets Tell Us About a Recession

Explore Zack’s Archives

View
Mitch's Mailbox
March 27th, 2024
Navigating Global Rate Cuts And Maximizing Investment Potential
Read more
Mitch's Mailbox
March 26th, 2024
Will a “Wall of Cash” Hit the Markets if Rates Fall?
Read more
Private Client Group
March 26th, 2024
Fed Holds Rates Steady, U.S. Industrial Output Flat, Real Estate Commission Shake-Up
Read more
Mitch on the Markets
March 25th, 2024
What Do Rising Corporate Debt Defaults Mean For The Economy?
Read more
Private Client Group
March 18th, 2024
Inflation Slightly Higher, UK Economy Grows, Retirement Savings Improve
Read more
Mitch on the Markets
March 18th, 2024
Waiting for the Market to Drop Before Investing? Read This First.
Read more

Daily financial tips directly
from the Zacks family.

Top

Search

Contact

I'm a Private Client I'm a Financial Professional