By: Russ Kamp, Managing Director, Ryan ALM, Inc.

Happy New Year! At least it was for some US equity investors prior to this afternoon’s release of the December FOMC meeting notes, which once again highlighted the fact that there is no interest rate pivot in anyone’s near-term future, and according to the Fed, we are unlikely to see one for all of 2023. The Fed cited “considerable uncertainty around the consumer spending outlook”. Based on the chart below, I’d say that consumers are not taking their collective feet off the gas peddle.

Sure, we’ve witnessed a rotation from durable goods to services, but pandemic constraints certainly contributed to the greater focus on durables during the last couple of years. Folks are tired of looking at their home’s four walls and are just itching to get back outside, even if it means having to deal with US aviation and all of its travails! Individuals have been working through their significant stimulus-induced excess savings, but with the labor market still humming along, spending can be maintained for quite some time. In fact, some Fed participants “…commented that labor supply appeared to be constrained by structural factors such as early retirements, reduced availability or increased cost of childcare, more costly transportation, and reduced immigration.” As a result, wage growth is likely to remain elevated for the foreseeable future, and demand for goods and services, too.