10 reasons for investors to be thankful this Thanksgiving

It’s the time of year to reflect on what makes us thankful. For me, it starts with life having returned to a level of normalcy. It was only a few years ago that the COVID pandemic had us altering our Thanksgiving Day plans. I, for one, won’t miss having to hold the family gathering outside in 40-something degree weather. It wasn’t ideal, but in hindsight I was fortunate to be healthy and together with family.

As I once again return to the familiar Thanksgiving routine, I’m mindful of the many challenges that the world is facing and have no intention of sugarcoating these issues. I simply want to take a moment to focus on the true spirit of the holiday and remind myself of what I’m thankful for.

In that spirit, below is a list of 10 items that investors can be thankful for this year.

1. The US economy has been resilient

The “most-anticipated” recession on record has not occurred. Not only is the economy not in recession, but it has grown at a strong clip in 2023.¹

2. The costs associated with Thanksgiving are falling

Gas prices and airfares are falling, making it cheaper for Americans to travel to their friends and families this year than it was in 2022.² In addition, the traditional Thanksgiving meal won’t cost as much as last year either. The American Farm Bureau Federation reveals that seven of the 11 featured items on the Thanksgiving menu — including turkey, stuffing, peas, and cranberries — are down from last year.³

3. The US inflation rate peaked over a year ago

The inflation rate has fallen from 9.1% in June 2022 to 3.2% in the last reading.⁴ Admittedly, higher prices are still challenging American households. Nonetheless, the implications for the financial markets have been significant. Historically, the broad US equity market, as represented by the S&P 500 Index, has often performed well in the aftermath of a peak inflation rate, and this time has been no different.⁵

4. The Federal Reserve has likely finished raising rates

The rate of inflation has fallen rapidly⁶, and the market’s expectation for inflation has been contained within the Fed’s perceived “comfort zone.” This means the end of policy tightening is likely here.⁷ This should be music to the ears of investors who have been taught to “not fight the Fed.”

5. The US job market is still strong

The US unemployment rate has been under 4% for 1.5 years, while jobless claims remain well below the long-term average.⁸

6. Most Americans have fixed-rate mortgages

How is it possible for interest rates to jump by 5% in less than two years without a significant impact on American households?⁹ The answer is fixed-rate home mortgages. It’s estimated that 80% of Americans homeowners have fixed-rate mortgages, and most of them have interest rates below 4% or even below 3% after moving or refinancing when rates hit record lows during the pandemic.¹⁰

7. Investors do not appear euphoric

It’s been said that bull markets grow in skepticism and end in euphoria. Investors do not appear euphoric, with over $22 trillion sitting in bank deposits and money market strategies.¹¹ There appears to be “dry powder” that will likely return to the credit and equity markets in the coming years.

8. US corporate earnings are strong

S&P corporate earnings climbed to $220 in the third quarter, nearly doubling since the pandemic-driven low in 2020.¹²

9. There is income to be found in fixed income

Not that long ago, investors were clamoring to find yields of greater than 2% or 3%. Today, they’re now presented with higher interest rates across the US Treasury yield curve as well as in corporate and municipal bonds.¹³

10. The US economy has a long history of overcoming substantial challenges

Through every American generation, the economy has faced its share of challenges and has come back stronger. Over time, markets reflect whether conditions are getting better or worse, and history teaches us that conditions have tended to improve over time, even if the path isn’t always straight. It’s why the market, as represented by the S&P 500 Index, has hit a new high every 16 days since 1957 and is only a stone’s throw away from a new high today.¹⁴

Happy Thanksgiving. Be safe and be well.