Private Client Group

November 21st, 2022

Slowing of Interest Rate Increases, China and Japan’s Economic Slowdown, Gen Z Workers in this Labor Market

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With all the recent headlines surrounding the current state of the market, we are taking a deeper dive into key factors that we believe investors should keep an eye on, such as:

Top Fed Official Signals That Interest Rate Increases Could Slow – The Federal Reserve’s second in command, Lael Brainard, said this week that the Fed was likely to slow the pace of fed-funds rate increases down to 50 basis points in December. The central bank has raised rates by 75 basis points at four consecutive meetings, bringing the benchmark rate to a range of 3.75% and 4%. Ms. Brainard cited positive developments in U.S. inflation readings, with the consumer price index (CPI) increasing 7.7% year-over-year in October. This rate of inflation is still quite high, but it also marks a meaningful decline from June’s peak 9.1% rate and the 8.2% print in September. When the volatile food and energy categories are stripped out, the ‘core CPI’ was seen rising 6.3% year-over-year in October, down from the 6.6% rate in September. Ms. Brainard indicated that slowing down the pace of rate increases would allow the Fed to examine the effects on slowing the economy, which usually occurs with a lag.1

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What Happens to Your Investments if a Recession Hits?

No one quite knows when this bear market will end…or what’s next for the market. And as the Fed continues to fight inflation, some investors are questioning a potential recession ahead.

If you’re at or near retirement, a recession may require pivoting your retirement investing strategy. The market turbulence and uncertainty are scary—but now is the time to take action and prepare yourself for the coming months. It’s important to understand the following –


If you have $500,000 or more to invest, get our free guide. You’ll learn the scope and impact of recessions, and get our viewpoint on the most important moves you can make to weather a potential one. Don’t wait—get this guide today!
 
Download Your Copy Today: A Recession is Coming: 6 Insights to Know You’re Prepared2

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China and Japan Suffer Economic Slowdown – China and Japan have been suffering economic setbacks over the last few months. In China, the strict zero-Covid policies, falling exports, and a crumbling of the real estate sector have dragged growth down. Data out last week showed that China’s retail sales fell for the first time in five months and factory output also slowed. Adding to the challenges for global investors is the fact that China’s National Bureau of Statistics canceled the release of quarterly GDP data with no explanation recently, and days earlier the customs agency withheld trade data with no update for when the data may be released. Many analysts have lately turned to satellite imagery to gauge production and consumption activity, which in 2022 has pointed to significant weakness relative to 2021 and pre-pandemic. Japan is also struggling – its economy contracted in Q3 for the first time in a year, with GDP falling -0.3% quarter-over-quarter and -1.2% year-over-year.3

Where are the Young Gen Z Workers? There is an ongoing mystery in the U.S. labor market, and it involves young Gen Z workers (ages 20 to 24). Over the last year and a half, most workers across age groups have returned to the labor force, bringing the labor force participation rate roughly to the same level it was prior to the pandemic. But there’s one group missing: Gen Z’ers in their early 20s. For this category, the labor force participation rate averaged 72.1% in 2019 but stands at just 70.8% as of October 2022. In nominal terms, that means about 500,000 people in their early 20s have not returned to the workforce since the pandemic. There are a few theories for why this may be occurring. For one, some of this segment decided to enter graduate school in the wake of the pandemic, perhaps reluctant to dive back in. But perhaps the bigger reason is the still-tight labor market, and the thinking that a Gen Z’er can wait for a ‘better’ opportunity to show up. With layoffs hitting major technology companies and early signs that the labor market is softening, these Gen Z’ers may not want to wait too much longer.4

Current Bear Market Could Mean a Recession? Are your investments protected if another recession occurs? This is a very important question that investors need to ask themselves during this bear market.

If you’re at or near retirement, a recession may require pivoting your retirement investing strategy. It’s important to understand how recessions work, how long they last, and how to potentially protect yourself and your family from long-term damage to your assets and security. We can help you with our free guide, A Recession is Coming: 6 Insights to Know Now So You’re Prepared.5

If you have $500,000 or more to invest, get our free guide today. You’ll learn the scope and impact of recessions, and get our viewpoint on the most important moves you can make to weather this one. Don’t wait—get this guide today!

Disclosure

1 Wall Street Journal. November 14, 2022. https://www.wsj.com/articles/feds-brainard-says-rate-rise-pace-can-slow-soon-11668445354?mod=djemRTE_h

2 Zacks Investment Management reserves the right to amend the terms or rescind the free: A Recession is Coming: 6 Insights to Know Now So You’re Prepared offer at any time and for any reason at its discretion.

3 Wall Street Journal. November 15, 2022. https://www.wsj.com/articles/chinas-economy-takes-a-deeper-hit-as-retail-sales-turn-negative-11668496169?mod=djemRTE_h

4 Wall Street Journal. November 13, 2022. https://www.wsj.com/articles/labor-market-mystery-where-are-the-older-gen-z-workers-11668278379?mod=djemRTE_h

5 Zacks Investment Management reserves the right to amend the terms or rescind the free: A Recession is Coming: 6 Insights to Know Now So You’re Prepared offer at any time and for any reason at its discretion.


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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.

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