2023 has been one of the weirder years in my career, if not my life. While some of the data has been good, namely anything to do with the labor markets, the majority would have suggested a sluggish economy, at best. As we all know, up until now, the economy has been surprisingly resilient.
By resilient, I mean much better than it should be, at least officially.
Let’s think about it.
- The money supply has shrunk, which is highly unusual.
- The Conference Board’s Leading Economic Indicators have been negative for 19 consecutive months, the third longest streak since the series began in 1959.
- For their part, the regional purchasing managers indices and Fed surveys have been mostly dreadful, as in really bad.
- Not only did the Fed not cut the overnight rate this year, it actually raised it an additional 100 basis points.
- This increase on the short-end has led to an inverted yield curve, and a marked slowdown in credit extension.
- Finally, I don’t have to tell you what all these higher interest rates have done to the residential real estate market and bond portfolios.
In so many ways, we should all be thankful it wasn’t worse than it was in 2023.
After four consecutive years of head-scratching headlines and conflicting economic reports, I suspect just about everyone in the investment industry would love a return to some sense of normalcy. However, the further we get away from it, the cloudier the definition gets. If it turns out what we have experienced is “new normal,” the remainder of my official career is going to be, shall I say, interesting.
To be sure, when the data is as strange as it has been and the headlines as negative, people apparently like to hear what white-haired economist-types have to say. This is both flattering and beneficial for my emotional well-being. After all, I don’t get to have many opinions around the house, tongue-in-cheek, so getting to unleash them in public to captive audiences is a wonderful gift.
As for those opinions, as I touched upon last week, it is hard to envision a rip-roaring economy to start 2024. After a stellar 3rd quarter, consumer expenditures having been weakening. This bodes poorly for the always crucial holiday shopping season, which has many retailers already issuing ‘cautious’ guidance for the quarter.
You need to look no further than the price cuts, discounts and BOGOs already prevalent in many stores. Hey, retailers and wholesalers want to get stuff off their shelves in a hurry. Financing your inventory at 8%+ isn’t a lot of fun. So, merchants want to turn their merchandise over as quickly as possible to slash their debt service.
Basically, pick your poison if you are sitting on inventory. Cut your prices to get rid of it. Or pay the bank increasing amounts of interest to keep it on the shelf.
Oh, the bricks for our wall of worry start to add up, don’t they? In fact, I could drone on and bloviate about all the negative for the next 1,000 words. However, that wasn’t and isn’t the intent for this week’s newsletter. Or is it a blog these days? It is “Giving Thanks the Year Is Almost Over.”
For that, I suppose I would have to come up with some things for which I am thankful. I think it is pretty apparent why I am anxious to see this calendar year in the rearview mirror. So, what are some of those things that were/are more or less unique to 2023?
Here goes nothing, most of them work related.
- Since it is fresh on my mind, I am thankful I saw Peter Frampton in concert last night. It was a really good show, and not just another moldy-oldie farewell thing. The man can still wail.
- I am thankful I “learned” how to stick chunks of pecan wood directly on my gas grill, as opposed to using chips in a smoker box. While I am probably the last person to figure this one out, I am glad I did so because it makes chicken that much more awesome. Unfortunately, Beth isn’t a huge fan.
- I am thankful so many people and groups asked me to speak at their lunches, dinners, conferences and/or meetings. I have made more presentations this year than I have in any year since we started the company, even if I couldn’t tell you exactly how many. It has been a lot, and it makes me feel very blessed.
- I am thankful I have finally, at 55, learned to admit sometimes it is ME and not them. That was a hard one.
- I am really thankful for the hard work the Investment Committee has done this year. The quarterly magazines have been better than ever, and we have made some really astute trades and shifts to asset allocation. This year has been one of our better years.
- I can’t begin to tell you how thankful I am the market has rallied as strong as it has in November. Another month like October and September would have been exhausting for everyone involved.
- I am thankful I can find live blue crabs here in Birmingham, regardless of season. We had a good time steaming and picking them with my Marylander parents this year. It was a treat.
- I am thankful so many young people have wanted to come to work at Oakworth. They use words and phrases like “All-Start Team” and “dream job” in describing why they wanted to come here. That is incredibly fulfilling.
- Finally, I am incredibly thankful and honored to have American Banker magazine name Oakworth the country’s Best Bank to Work For in 2023….for the sixth consecutive year!
Of course, this is hardly an exhaustive list for what has been a weird year. Still, it is a pretty good one. It is important for me to sometimes sit down and write things out like this, as it forces me to focus on the good and not the confounding. Admittedly, I don’t do it often enough, but perhaps that can be a New Year’s Resolution for 2024.
If enough people do this, perhaps the country will feel better about itself. You know, be in a better mood, and have better things to do than yell at one another and being offended over nothing. This higher frame of mind would flow into investors’ mindsets, and it would be this enormous, virtuous cycle. I say it is worth a shot.
Or we could have another year like 2023. You never know, it might just be the New Normal.
Thank you for your continued support. As always, I hope this newsletter finds you and your family well. May your blessings outweigh your sorrows on this any every day. Also, please be sure to tune into our podcast, Trading Perspectives, which is available on every platform.
John Norris
Chief Economist
Please note, nothing in this newsletter should be considered or otherwise construed as an offer to buy or sell investment services or securities of any type. Any individual action you might take from reading this newsletter is at your own risk. My opinion, as those of our Investment Committee, is subject to change without notice. Finally, the opinions expressed herein are not necessarily those of the rest of the associates and/or shareholders of Oakworth Capital Bank or the official position of the company itself.