Weekly Macro Minute

GuideStone Reflections

How can I give you up, Ephraim?

How can I surrender you, Israel?

I have had a change of heart;

my compassion is stirred!

Hosea 11:8, CSB

Being an Old Testament prophet had to be one of the worst jobs on the market. You were never popular, usually ignored, and occasionally in danger. But poor Hosea may have experienced the worst of it. God had him marry an unfaithful woman whose repeated adultery eventually became public knowledge. He was asked to demonstrate God’s pain over his wayward bride, the nation of Israel, by living in a bad relationship. The “other man” in this divine drama of heartbreak was the Canaanite god of fertility, Baal. When the Israelites moved back to Canaan, they incorporated the worship of Baal into their cultural life, an act of spiritual adultery. For those of us married, if this characterized our relationship with our spouse, we would say, “Enough is enough.” But not our Lord. Hosea also got to demonstrate the restorative love of God. He redeemed his wife, Gomer, swearing his passion and commitment to her anew.

Hosea’s ministry demonstrated that God equates his relationship with his people to the intimacy of marriage. Typically, with family, you get who you get. But you choose your spouse. It’s not by accident that Paul describes the church as the bride of Christ in Ephesians 5. He speaks the same language as Hosea. God betrothed himself to us through the covenant of the cross of Christ. As Hosea spent all he had to purchase Gomer from her wretched condition, God redeemed us with everything he had, namely his Son. And just as one spouse’s joy is bound up in the other, God’s joy is bound up in his people.

Knowing how the Lord feels for us should at least put a check in our steps. It should open our ears more to the guidance of the Holy Spirit. When our hearts wander from him, we’re committing spiritual adultery. He grieves and yearns to bring us back into fellowship with him by any means necessary. When we sin, he asks, “How can I give you up?” The answer is that he can’t.

In the Economy

The Consumer Price Index (CPI) was in line with reduced expectations for inflation at headline numbers: -0.1% headline and 0.3% core (headline ex. food and energy) month-over-month. Annual rates were the slowest in over a year at 6.5% and 5.7% year-over-year, respectively. CPI slowdown broadened with most of the report weaker besides a gain in shelter, which tends to lag. A lot of attention centered on falling car prices (used cars down 2.5%). Other data demonstrated surprising economic strength. Weekly jobless claims fell to a 3-month low of 205,000, and the University of Michigan's consumer sentiment reading jumped notably to the highest since April 2022 (but remains depressed). Inflation expectations were mixed at +4.0% in one year – much better than expected, while 5–10-year expectations inched up to 3.0%. Easing inflation bolstered the bullish argument for an economic soft landing (i.e., no recession) and increased bets on the Federal Reserve easing later in 2023. However, we believe continued strength in the labor market and GDP further supports the Fed’s tightening measures.

Global stocks pushed forward with a second consecutive week of solid gains. In the U.S., growth-oriented stocks outperformed, while international stocks led gains across both developed and emerging markets in a powerful risk-on rally that now has some headline markets up roughly 10% on the year. Significant European strength stems from the belief that a material recession can now be averted as energy prices have collapsed on warmer weather and sufficient natural gas availability. China continues to reopen with a vengeance, pushing its equity prices higher and causing its junk bonds (including real estate developers) to lead global gains this year.

The U.S. dollar has fallen over 2% thus far in 2023. In particular, the Yen strengthened over 3% versus the dollar year-to-date as yields have risen across the curve. The Bank of Japan has had to ramp up bond purchases to maintain a 50-basis point cap on the 10-year as traders speculate on an earlier timeframe to normalize policy. A decline in the dollar typically coincides with a global risk-on environment.

Across the Markets

• U.S. equities finished higher in Friday trading, ending near best levels.
• Major equity indices logged a second straight weekly gain to start 2023 (S&P^® 500 +2.67% on the week).
• Yields again fell across the U.S. curve, with the 10-year yield closing at 3.5% after hitting an intraday low of 3.43%.
• Oil posted its biggest weekly advance since October, with WTI up over 8%, due partly to optimism surrounding China’s reopening. (If it holds, this will impact CPI.)
• The Atlanta Fed’s GDP estimate inched up to a robust 4.1% for the fourth quarter of 2022 but remains an outlier versus other forecasts.