Weekly Investment Update: January 23, 2022

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Key Events: The government is hitting its debt limit

The US bumped up against the debt limit this week. Congress created the first aggregate debt limit in 1939, and it became a political tool to influence government spending in 1953 under President Eisenhower. Congress has raised the limit routinely since then but has increasingly used the issue as a political weapon in the last quarter century.

A look at the federal surplus/deficit as a percentage of GDP (in the chart below) highlights the issue. Deficits increased significantly during the global financial crisis and again during the pandemic; hitting the debt limit has highlighted the need to control spending. It remains to be seen how Congress and the White House will address the issue in a lasting way.

Market Review: A strong start stalls, recovering on Friday

The market provided strong returns for the first couple of weeks of 2023, but they stalled out this week – even after a strong upward move on Friday. The S&P 500 lost 0.6%, bringing the YTD gain to 3.5%. Most markets ended the week with small losses, but high-quality bonds performed well as economic data softened and recession risks remained at forefront of investors’ minds.

Outlook: Earnings season = volatility

Markets are anticipating the earnings season while also digesting volatile economic data and Fed speeches. The Fed is delivering a consistent message that rates will remain high, but the market sees softer economic data as a way to escape that path. It seems likely that the market will react to any earnings that come in below expectations in a similar manner.

This material is intended to be educational in nature, and not as a recommendation of any particular strategy, approach, product or concept for any particular advisor or client. These materials are not intended as any form of substitute for individualized investment advice. The discussion is general in nature, and therefore not intended to recommend or endorse any asset class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own. Before participating in any investment program or making any investment, clients as well as all other readers are encouraged to consult with their own professional advisers, including investment advisers and tax advisors. OneAscent can assist in determining a suitable investment approach for a given individual, which may or may not closely resemble the strategies outlined herein.

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Past performance may not be representative of future results.  All investments are subject to loss.  Forecasts regarding the market or economy are subject to a wide range of possible outcomes.  The views presented in this market update may prove to be inaccurate for a variety of factors.  These views are as of the date listed above and are subject to change based on changes in fundamental economic or market-related data.  Please contact your Financial Advisor in order to complete an updated risk assessment to ensure that your investment allocation is appropriate.