{"id":13631,"date":"2025-01-20T16:00:40","date_gmt":"2025-01-20T16:00:40","guid":{"rendered":"https:\/\/zacksim.com\/blog\/?p=13631"},"modified":"2025-01-20T16:00:41","modified_gmt":"2025-01-20T16:00:41","slug":"fed-faces-mixed-data-corporate-bankruptcies-up-europes-economic-woes","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/fed-faces-mixed-data-corporate-bankruptcies-up-europes-economic-woes\/","title":{"rendered":"Fed Faces Mixed Data, Corporate Bankruptcies Up, Europe&#8217;s Economic Woes"},"content":{"rendered":"\n<p>Focusing on the strategies that matter most is essential in today\u2019s market. This week\u2019s <em>Steady Investor<\/em> highlights three key themes that are driving the current investment landscape\u2014offering insights to help you stay ahead:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"has-black-color has-text-color has-link-color wp-elements-4773a1c14192bd6743c4747b8c22e246\"><a>Strong jobs and steady inflation give the Fed mixed data<\/a><\/li>\n\n\n\n<li>Corporate bankruptcies are on the rise<\/li>\n\n\n\n<li>Germany\u2019s contraction signals European growth woes<\/li>\n<\/ul>\n\n\n\n<p class=\"has-black-color has-text-color has-link-color wp-elements-7b929becd2761e9ba65b16e3817d810e\"><strong>Strong Jobs Data and Steady Inflation Give the Fed a Mixed Bag of Data \u2013 <\/strong><a>The Fed has a dual mandate of price stability and maximum employment, and over the past several days we saw key data from both categories. The U.S. Labor Department reported that the U.S. economy added 256,000 jobs in December, which was well above expectations and marked a considerable increase from the pace of hiring seen in the second half of last year. Labor market data has been volatile in recent quarters and can be subject to major revisions, but the overarching takeaway for Fed watchers is that the labor market remains on solid footing overall. It was reported that the U.S. economy added 2.2 million jobs in 2024, which is more than double the expectations outlined in January. From the standpoint of Fed policy, the strong December jobs report effectively dashed all hope for a rate cut at the January meeting, given that inflation remains above target. This brings us to the consumer price index (CPI) measure of inflation that was also released last week, showing headline CPI rising at 2.9% year-over-year with core prices up 3.2%.<sup>1<\/sup> This inflation print remains within striking distance of the Fed\u2019s 2% target, but it also makes an easy case for the Fed to proceed with caution in Q1 2025. While underlying inflation trends still point to an easing in overall price pressures, Fed Chairman Jerome Powell has stated that the Fed is considering policy uncertainty with the incoming administration as a factor in determining the path of rates. Moreover, we would argue that non-monetary policy forces\u2014like high fiscal deficits and \u2018risk-on\u2019 sentiment in capital markets\u2014are providing meaningful tailwinds to demand in the economy, which removes urgency from lowering rates with inflation still above 2%.<sup>2<\/sup><\/a><\/p>\n\n\n\n<p><strong><u><a href=\"https:\/\/go.steadyinvestor.com\/zim-market-timing?source=zim&amp;medium=blog&amp;term=steadyinvestor_zim_market_timing_01_20_2025&amp;content=market_timing\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/zim-market-timing?source=zim&amp;medium=blog&amp;term=steadyinvestor_zim_market_timing_01_20_2025&amp;content=market_timing\">Avoid the Perils of Market Timing<\/a><\/u><\/strong><\/p>\n\n\n\n<p>Market timing is a costly mistake many investors make, especially when emotions take over. Selling during downturns or chasing gains during rallies can severely impact long-term returns.<\/p>\n\n\n\n<p>These emotional reactions are a natural response, but they can derail your investment strategy.<\/p>\n\n\n\n<p>Our free guide, <strong><em><u><a href=\"https:\/\/go.steadyinvestor.com\/zim-market-timing?source=zim&amp;medium=blog&amp;term=steadyinvestor_zim_market_timing_01_20_2025&amp;content=market_timing\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/zim-market-timing?source=zim&amp;medium=blog&amp;term=steadyinvestor_zim_market_timing_01_20_2025&amp;content=market_timing\">The Perils of Market Timing<sup>3<\/sup><\/a><\/u><\/em><\/strong>, highlights the dangers of timing the market and offers practical ways to avoid them. Inside, you\u2019ll learn:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>How Market Timing Can Impact Returns<\/li>\n\n\n\n<li>How to Avoid the Market Timing Trap: 2 Steps<\/li>\n\n\n\n<li>Bottom Line for Investors<\/li>\n<\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and want to learn how you may be able to avoid these mistakes today, click on the link below to get your free copy:<br>\u00a0<br><strong><u><a href=\"https:\/\/go.steadyinvestor.com\/zim-market-timing?source=zim&amp;medium=blog&amp;term=steadyinvestor_zim_market_timing_01_20_2025&amp;content=market_timing\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/zim-market-timing?source=zim&amp;medium=blog&amp;term=steadyinvestor_zim_market_timing_01_20_2025&amp;content=market_timing\">Download Zacks Guide, \u201cThe Perils of Market Timing\u201d<sup>3<\/sup><\/a><\/u><\/strong><\/p>\n\n\n\n<p class=\"has-black-color has-text-color has-link-color wp-elements-d0e2e4c3ed39e7c15fa5ca2046db7ef3\"><a><strong>Corporate Bankruptcies are on the Rise. Should Investors Be Concerned?<\/strong> <\/a><a>Data on corporate debt markets have been causing some concern amongst investors. According to S&amp;P Global, corporate bankruptcies have risen to their highest levels since 2010, with a total of 694 U.S. companies filing for bankruptcies in 2024. That\u2019s below the 828 companies that filed for bankruptcy in 2010 but marks a sharp increase from recent years\u2014including being up 86% from 2022. While some investors and commentators have signaled alarm at the spike in defaults, it is important to zoom out and remember that corporate bankruptcies are a lagging indicator, not a leading one. In 2010, the spike in corporate bankruptcies was a result of companies that could not ultimately survive the 2008 Global Financial Crisis, but by then the U.S. economy was in a cyclical upturn. Similarly, 2024\u2019s elevated level of corporate bankruptcies is almost certainly a reflection of companies that could no longer manage debt because of the inflation and rising interest rate event of 2022, even as the economy has continued to grow, and rates have arguably \u2018normalized.\u2019 One of the important metrics to observe when assessing the health of corporate debt markets is the spread between investment-grade corporate bonds and U.S. Treasury bonds. As seen in the chart below, spreads are at very low levels relative to history, signaling that the market is not pricing in high levels of default risk.<sup>4<\/sup><\/a><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"347\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2025\/01\/image-1-1-1024x347.png\" alt=\"\" class=\"wp-image-13632\" srcset=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2025\/01\/image-1-1-1024x347.png 1024w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2025\/01\/image-1-1-300x102.png 300w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2025\/01\/image-1-1-768x260.png 768w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2025\/01\/image-1-1.png 1320w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\"><strong><em>Source: Federal Reserve Bank of St. Louis<sup>5<\/sup><\/em><\/strong><\/figcaption><\/figure>\n\n\n\n<p class=\"has-black-color has-text-color has-link-color wp-elements-03f6616277f2454242d7abc63d2ff670\"><a><strong>European Growth Woes Continue with Germany\u2019s Economic Contraction<\/strong><\/a><strong> \u2013 <\/strong><a>Germany is the leading economy in the European Union, and its growth struggles in 2024 are emblematic of problems facing the entire economic bloc. Germany\u2019s statistics office, Destatis, reported that the German economy contracted by -0.2% in full-year 2024, which followed a slight contraction in 2023. Germany is a manufacturing and export economy, and its flagship car industry has struggled to breakthrough in the transition to electric vehicles while facing increasing pressure from Chinese competition. High interest rates and energy costs have also pressured margins and investments, as is the case for most major European economies. This brings up a key thesis for favoring U.S. stocks in the new year, as we believe \u2018U.S. exceptionalism\u2019 will continue to be a key driver of returns in public markets. Relative to global competitors like European countries, there is a straightforward argument that the U.S. is an attractive place to do business\u2014economic growth is strong, AI \u2018hyper-scalers\u2019 and major technology players have delivered a torrid pace of earnings growth that should broaden out to other companies and sectors in the new year, and investors and business leaders are anticipating that the incoming administration will generally be pro-business and pro-growth. Europe, meanwhile, faces rising fiscal deficits and weak domestic demand, which could continue to serve as headwinds to growth.<sup>6<\/sup><\/a><\/p>\n\n\n\n<p><strong>The Hidden Dangers of Market Timing &#8211; <\/strong>Market shifts can tempt you to buy at the &#8220;perfect time&#8221; or sell in fear during a crisis. But these emotional decisions often harm your long-term success.<\/p>\n\n\n\n<p>Rather than reacting impulsively, it\u2019s crucial to stick to a long-term plan. Our guide, <strong><a href=\"https:\/\/go.steadyinvestor.com\/zim-market-timing?source=zim&amp;medium=blog&amp;term=steadyinvestor_zim_market_timing_01_20_2025&amp;content=market_timing\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/zim-market-timing?source=zim&amp;medium=blog&amp;term=steadyinvestor_zim_market_timing_01_20_2025&amp;content=market_timing\"><em><u>The Perils of Market Timin<\/u><\/em><\/a><\/strong><em><a href=\"https:\/\/go.steadyinvestor.com\/zim-market-timing?source=zim&amp;medium=blog&amp;term=steadyinvestor_zim_market_timing_01_20_2025&amp;content=market_timing\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/zim-market-timing?source=zim&amp;medium=blog&amp;term=steadyinvestor_zim_market_timing_01_20_2025&amp;content=market_timing\"><u>g<\/u><\/a><\/em><sup><a href=\"https:\/\/go.steadyinvestor.com\/zim-market-timing?source=zim&amp;medium=blog&amp;term=steadyinvestor_zim_market_timing_01_20_2025&amp;content=market_timing\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/zim-market-timing?source=zim&amp;medium=blog&amp;term=steadyinvestor_zim_market_timing_01_20_2025&amp;content=market_timing\">7<\/a><\/sup>, explores the emotional traps investors fall into and offers simple, effective ways to avoid them.<\/p>\n\n\n\n<p><br>In this guide, you\u2019ll discover:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>How Market Timing Can Impact Returns<\/li>\n\n\n\n<li>How to Avoid the Market Timing Trap: 2 Steps<\/li>\n\n\n\n<li>Bottom Line for Investors<\/li>\n<\/ul>\n\n\n\n<p>If you have $500,000 or more to invest, download this free guide today by clicking on the link below.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Fed must consider strong jobs data and steady inflation, bankruptcies reach highest levels since 2010, Germany&#8217;s economic contraction is emblematic of European struggles.<\/p>\n","protected":false},"author":3,"featured_media":13557,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[71,73],"tags":[],"class_list":["post-13631","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-private-client-group","category-steady-investors-week"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13631","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=13631"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13631\/revisions"}],"predecessor-version":[{"id":13633,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13631\/revisions\/13633"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media\/13557"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=13631"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=13631"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=13631"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}