Zacks Investment Management

In today’s Steady Investor, we are taking a deeper dive into key factors that we believe are impacting the future state of this market, such as:

• European economy picks up
• Small businesses are hiring
• Leading indicator in the labor market

European Economy Shows Sign of Stabilizing – The worst-case scenarios for Europe’s economy may have been avoided. For months, there were fears that energy shortages, high inflation, and rising interest rates would send Europe into a recession. But thanks to a mild winter, energy-conservation efforts, a shift in sourcing for natural gas, and hundreds of billions in new fiscal spending, Europe appears able to avoid a recession – at least for now. S&P Global’s composite purchasing managers index – which gives a good read on activity in services and manufacturing – showed Europe moving from contraction territory (49.3) to expansion (50.2) in January. Germany, Europe’s largest and most vital economy, showed strong signs of stabilizing which prompted the German Economy Ministry to forecast 0.2% growth in 2023. Last fall, the ministry called for a -0.4% contraction. December composite output data for the U.S. also improved, but the index remains in contraction territory (46.6). Europe’s economic stabilization coupled with China’s reopening could prevent the global economy from entering a recession in 2023, and the fact that the U.S. is nearing the end of its interest rate cycle may also provide support to a ‘better-than-expected’ outcome for growth this year.¹

Handling Volatility – What You Should Do!

Volatility often results in emotional decision-making—like when investors believe that selling out of stocks is the best route to avoid further losses. The real challenge is not finding a way to eliminate volatility—it is developing a mental approach to dealing with it. Our guide, “Helping You Manage Market Volatility,” will provide you with insights and tips to do just that. Get answers to questions like:

• Market downturns can and will occur, but what should you do?
• How can diversification help you manage volatility without compromising your returns?
• When volatility is too much for you to handle, how can a money manager help?
• Can volatility be an opportunity?

If you have $500,000 or more to invest and want to get answers to the questions above, click on the link below to download this guide today!

Download Zacks Volatility Guide, “Helping You Manage Market Volatility.”²

Still Innovating – Recent headlines have shined a spotlight on high-profile layoffs, mainly at the biggest technology companies like Google, Meta, Amazon, and Microsoft. But a major engine in the U.S. economy is one that often gets less coverage: entrepreneurs and small businesses. By these measures, the economy continues to look stronger than most appreciate. In 2022, Americans filed more than 5 million applications to start new businesses, the second-highest total on record.³

This boom in business formation suggests that innovators and entrepreneurs are not being fazed by the possibility of a looming recession. In fact, this has been true basically since the start of the pandemic. According to Labor Department data, small businesses (with fewer than 250 employees) have hired a net of 3.67 million people since February 2020, compared to large businesses shedding some 800,000 jobs over the same period. Today, 80% of available job openings are for positions at small businesses, underscoring this vital, yet underappreciated, feature of the U.S. economy.

A Leading Indicator in the Labor Market Points to Possible Weakness Ahead – Small businesses and new business formation look strong. But another overlooked aspect of the jobs market is starting to show weakness: the firing of temporary workers. In the final five months of 2022, employers parted ways with 110,800 temporary workers, including 35,000 in December alone. Many of the December workers were likely hires brought on to help with the holiday shopping season, which we now know was strongest in October and November but fizzled off in December. Trends in the temp worker market are worth watching because in the past they have been reliable leading indicators for economic weakness. In 2001 and early 2007, pullbacks in temporary employment preceded pullbacks in the broader labor market, which were both triggered by recessions. In a sense, this trend in labor markets may ultimately be good news, to the extent the Federal Reserve views it as a sign that tighter financial conditions are easing job and wage pressures.⁵

Navigating Through Market Volatility – One challenge investors will face this year is market volatility. While there may not be ways to eliminate it, there are ways to navigate it and even prosper through it.  

In our guide, “Helping You Manage Market Volatility,”⁶ we provide you with insights and tips to do just that. Get answers to questions like:

• Market downturns can and will occur, but what should you do?
• How can diversification help you manage volatility without compromising your returns?
• When volatility is too much for you to handle, how can a money manager help?
• Can volatility actually be an opportunity?

If you have $500,000 or more to invest and want to get answers to the questions above, click on the link below to download this guide today!

Disclosure