Weekly Macro Minute

GuideStone Reflections

An account of the genealogy of Jesus Christ, the Son of David, the Son of Abraham:

Judah fathered Perez and Zerah by Tamar

Salmon fathered Boaz by Rahab

Boaz fathered Obed by Ruth

David fathered Solomon by Uriah’s wife

Matthew 1:3, 5 – 6 (CSB)

The first chapter of Matthew's Gospel is one of those long series of verses that seem to exist solely to tell us who fathered whom. Bloodlines were extremely important to the people of the ancient Near East. Your honor, influence and opportunities were bound by your genealogy. In other words, your family's past determined your future. So, it’s fitting that to introduce the story of Jesus, Matthew begins with a family tree. Genealogies were typically traced through the father, but Matthew makes the questionable choice of including the names of four women, all of whom were surrounded by scandal and entangled in some shady events. Tamar was cruelly exploited, and her burden of shame and dishonor drove her to an ugly act of desperation (Genesis 38). Rahab was a pagan prostitute (Joshua 2). Ruth was the ultimate outsider – a Moabite, one of the long-standing blood enemies of Israel (Ruth 1). Uriah's wife was Bathsheba, a woman victimized by powers beyond her control. By ancient standards, Matthew's genealogy was not a good introduction to the King of Kings and Lord of Lords. These were family stories that should have been swept under the rug.

But Matthew dropped the names of these scandalous women as a hint of what Jesus came to do. From Tamar, the shamed one, came the One who restores honor. From Rahab, the tainted one, came the One who purifies and redeems. From Ruth, the outsider, came the One who brings grace to all. And from Bathsheba, the victim, came the One who brings comfort. As the Apostle Paul wrote, “God has chosen what is insignificant and despised in the world” (1 Corinthians 1:28, CSB). Scandalous names filled Jesus' earthly family tree. But his spiritual family tree isn't any better. It's filled with sinful people like you and me, now adopted as sons and daughters of God through the cross. Jesus takes us all with our scandals, shame and sin to redeem us into new creations.

As you decorate your Christmas trees this Advent season, be reminded that the scandal of Jesus' family tree brings hope to all mankind!

In the Economy

The S&P 500^® Index finished above 4,000 for the first time in over two months in light trading during the holiday-shortened week. A risk-on mood permeated equity and credit markets despite several ominous predictors of a recession looming for 2023 and the subsequent big hit to earnings that has yet to be priced in. Treasury markets, in particular, are flashing recession loud and clear, with the 3-month to 10-Year yield curve now inverted by 53 basis points thanks to longer-term yields declining (the 10-year closed at 3.67%).

Equity markets appeared buoyed by more dovish-sounding Federal Reserve minutes in which most participants saw that a “slowing in the pace of increases would likely soon be appropriate.” However, this seems like a rather obvious assessment after four consecutive 75-basis point hikes, and a slowing pace of increases is different than the Fed shifting to a stimulative policy. The terminal rate is now likely to be higher than what had been previously anticipated. Markets are still optimistically pricing in rate cuts for 2023. Significant uncertainty remains on the development of inflation and growth, but we’d argue that any optimism is misplaced as the risks are clearly to the downside for investors.

Early data suggests U.S. online shoppers spent record amounts this Thanksgiving weekend, but results look lackluster. Adobe Analytics showed 2% to 3% increases for Thanksgiving Day and Black Friday online shopping from the prior year. However, that's in nominal terms and appears relatively weak, given the robust inflation level. The facts remain that consumer sentiment is low, U.S. consumers continue to spend down excess savings, and credit card debt is near all-time highs.

European stock markets shared U.S. optimism and generally rose for a sixth consecutive week. These gains were despite European Central Bank minutes noting “monetary tightening would probably need to continue” and Purchasing Managers’ Index (PMI) data suggesting both the UK and Eurozone have already entered the throes of recession. Japan stocks also gained, with pundits pointing to optimism on a more dovish Federal Reserve. Meanwhile, China’s markets finished lower as the country is amid its broadest and highest surge of COVID cases yet, causing significant disruption to economic activity from both targeted lockdowns and residents fearing travel.

The S&P U.S. Composite PMI data reported this past week remained in contraction territory (below 50) for a fifth consecutive month, with preliminary November data registering at a subdued 46.3, below forecasts. Meanwhile, the University of Michigan's 5-to-10-year inflation expectations held steady at 3.0%. Thus, the combination of economic weakness and long-run inflation expectations well above the 2% target shows how difficult it will be for the Fed to achieve its objective.

Across the Markets

• The S&P 500^® index rose over 2% on the week, bringing gains from the early October lows to 12.5% (which, for context, is still nearly 5% less than the prior bear market rally off the June 16 low).
• Defensive sectors like consumer staples and health care performed best, while cyclical sectors lagged.
• Meanwhile, the dollar continued to cool and is now down over 7% to about a 3-month low.
• Oil prices declined over 6.5% on the week for WTI thanks to faltering Asia demand due to China's COVID-related lockdowns.
• The Atlanta Fed's GDPNow model estimate for U.S. real GDP growth for the fourth quarter of 2022 has marched to a robust 4.3% in a significant disconnect from the other consensus estimates, which range from about -1.00% to +1.75%.