Broker Check

McKnight Weekly Market Insights: How is the Economy Adjusting with the Current Inflation Status?

August 14, 2023

Happy Monday!

In this week's newsletter, we'll be covering:

  • Next week's Medicare webinar event
  • Status of the Bond market
  • The producer price index

It's National Financial Awareness Day, if you need assistance in reviewing your finances, contact us to setup an appointment! In case you missed last week's news... click here to register for our upcoming tailgate event!

- Javier Hernandez

Don't forget to join us next week for our upcoming Medicare webinar event! It will be a great time learning about Medicare Part A, delaying Part B, and much more!

  Register Here  

Amid the Federal Reserve's increase in interest rates, the decline in the quality of US corporate credit has been modest, with companies maintaining strong profitability and debt service capabilities that enable them to manage increased balance sheet leverage. This is exemplified by positive changes in credit ratings compared to previous post-recession periods. Following the COVID-19 pandemic, the rise in bonds with improved credit ratings has exceeded the decline in ratings, showing a more favorable trend compared to the Global Financial Crisis. To learn more, click here to check out the most recent Market Monitor.

Despite encouraging inflation figures, stock markets remained sluggish in August due to unfavorable economic data and a ratings downgrade, leading to mixed investor sentiment. The Dow Jones Industrial Average saw a modest increase of 0.62%, while the Standard & Poor's 500 experienced a slight decline of 0.31%. In contrast, the Nasdaq Composite index faced a notable drop of 1.90% over the week. On the international front, the MSCI EAFE index, monitoring developed foreign stock markets, managed a 0.50% uptick.

Recap of a Turbulent Week in the Stock Market

Last week in the stock market was marked by a turbulent trajectory. The week commenced on a positive note driven by the anticipation of crucial inflation data, yet experienced a mid-week decline prompted by Moody's downgrade of the banking sector and news of a significant drop in China's exports. Notably, stocks surged following Thursday's better-than-expected inflation report, but these gains quickly dissipated as bond yields surged during a 30-year Treasury bond auction.

The market's struggle to maintain stability is exemplified by the waning influence of the technology sector, which had been a driving force behind this year's gains. With the erosion of tech's leadership, stocks faced challenges in sustaining momentum. The combined factors of rising yields and tech earnings falling short of validating the sector's elevated valuations have contributed to the downturn in both the technology sector and the broader market.

Moderate Price Trends and Mixed Signals in Consumer and Producer Price Indexes

In July, inflation data indicated moderate price pressures, with consumer prices rising by a slight 0.2%, aligning with market predictions, and the annual inflation rate reaching 3.2%, slightly below consensus estimates but still higher than June's 3.0% increase. Notably, the core Consumer Price Index (CPI), excluding food and energy, displayed positive trends by rising at its slowest rate since October 2021, reflecting stability.

The producer price index presented a more mixed scenario, surpassing expectations with a 0.3% increase compared to the projected 0.2%, while the year-over-year increase stood at a mere 0.8%. Similarly, core producer prices exhibited a 12-month increase of 2.4%, marking one of the lowest rates since January 2021, highlighting certain degrees of moderation in the inflation landscape.

"When things go wrong, you'll find they usually go on getting worse for some time; but when things once start going right they often go on getting better."

– C.S. Lewis

Is child support or alimony considered taxable income?

Child support payments are not taxable income for the recipient or tax-deductible for the payer. Therefore, you should not include child support payments when calculating gross income for tax purposes.

On the other hand, alimony payments may be taxable income for the recipient and tax-deductible for the payer depending on the specific divorce or separation instrument. For divorce or separation instruments executed on or before December 31, 2018, alimony payments are generally taxable income for the recipient and tax-deductible for the payer. However, for divorce or separation instruments executed after December 31, 2018, or those executed before that date but later modified to repeal the deduction for alimony expressly, the payments are neither taxable income nor tax-deductible. In either case, when determining gross income for tax purposes, alimony payments received should be included or excluded based on the specific instrument.

*This information is not intended to substitute for specific individualized tax advice. We suggest you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov6

3 Yoga Poses for Beginners

The first pose is Downward-Facing Dog, used in most yoga practices. In it, you stack your arms under your shoulders, and your bottom is in the air with your back legs straight. Your body is in the shape of an upside-down "V."

The next is Crescent Lunge. Stand in a forward lunge with one foot in front and bent. Your back leg is straight. Now, straighten your arms and lift them over your head; you often see this pose used in yoga flow classes.

Last, we have the Triangle pose. Step your feet apart (wider than your shoulders). Then, hinge at your hip and lean over your front leg. Reach down with the same arm in front and rest it on the floor or a yoga block.

Tip adapted from SELF Magazine7

A man tells a friend that he married three women yesterday, which was legal. In fact, it was routine. How can he make such a statement? 


Last week’s riddle: What has three feet yet cannot run or walk?Answer: A yard.

Muizenberg Beach, Cape Town, South Africa

Footnotes and Sources

1. The Wall Street Journal, August 11, 2023

2. The Wall Street Journal, August 11, 2023

3. The Wall Street Journal, August 11, 2023

4. CNBC, August 10, 2023

5. CNBC, August 11, 2023

6., November 1, 2022 

7. SELF Magazine, April 24, 2023

Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.

The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.

The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.

The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.

U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.

Please consult your financial professional for additional information.

This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG is not affiliated with the named representative, financial professional, Registered Investment Advisor, Broker-Dealer, nor state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

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