Weekly Macro Minute

GuideStone Reflections

“Zerubbabel’s hands have laid the foundation of this house, and his hands will complete it…. For who despises the day of small things? These seven eyes of the Lord, which scan throughout the whole earth, will rejoice when they see the ceremonial stone in Zerubbabel’s hand.”

Zechariah 4:9 – 10, CSB

By this time in the Old Testament, the Babylonian exile was over. Zerubbabel, the Persian-appointed governor of Judah, had been tasked with leading the rebuilding of Jerusalem and, most importantly, the reconstruction of the Temple. But after about 20 years, he had little to show for it. The city and the Temple were still works-in-progress, and the job was only becoming more challenging due to hostile neighbors and low resources. The initial excitement of coming home and starting something new had worn off. The dreams of tomorrow were giving way to the reality of today. Zerubbabel and his people were in the middle of a long, slow, uphill climb.

So, the Lord sent the prophet Zechariah with a message of encouragement. Zerubbabel was to take heart. Yes, he was in a “day of small things,” but he needn’t be discouraged by what seemed to be the little progress he had made. Zerubbabel had laid the Temple’s foundation, and through the strength of the Spirit, he would eventually set the capstone of the structure (the “ceremonial stone”). God himself (the “seven eyes of the Lord”) would rejoice on his behalf. God had great plans for the Temple, not the least of which was that his own Son would worship and teach there. But it would take little, consistently faithful steps to see it through.

Zechariah’s message is a reminder that God delights in building big things from small beginnings. Just look at God’s redemptive plan for the world. It began with one pagan herdsman, Abraham, living on the plains of what is modern-day Iraq. From that small beginning, his Kingdom has encroached on this fallen world, slowly remaking it one person at a time.

Explosive progress is not necessarily good and is always questionable. God is an artisan, not a manufacturer. He works slowly and expects nothing more than small, faithful steps from us. Those small steps you take to obey and follow him, the Spirit takes them and multiplies them for his glory and your good. Don’t be dismayed by the apparent size of your life. It’s bigger in God’s plan than the sum of its parts. Don’t despise the day of small things.

Across the Markets

Global stocks ended the holiday-shortened week decidedly in negative territory as the combination of growth surprises and upside inflation shocks rocked markets due to the corresponding prospect of a higher terminal Fed Funds rate held for a longer period of time. The S&P 500® Index logged its worst weekly performance since early December, with communication services and consumer discretionary names getting hit the hardest. This price action translates to a roughly 35% retracement of the bear market rally that began in October, but the Index remains up 3.7% year-to-date. U.S. Treasury yields rose across the entirety of the curve, with some tenors rising as much as 15 basis points. In particular, the 2-year hit a fresh cycle high above 4.8%, pushing the yield curve to peak inversion, while the 10-year yield moved from 3.83% to 3.94%. WTI crude oil was roughly flat week-over-week at $76.45/bbl.

European stocks experienced a similar downward trajectory as better-than-expected economic and corporate data sparked concerns that central banks will have to hike rates more aggressively. Japanese stocks were essentially flat as dovish comments from incoming Bank of Japan Governor Kazuo Ueda supported markets. Stocks in China bucked the bearish trend across global markets and put up solid gains, a welcome turn of events after a sell-off that persisted for three weeks prior.

In the Economy

Friday’s core Personal Consumption Expenditures Price Index (PCE) – the Federal Reserve's preferred inflation gauge – rose 0.6% in January, well above the expected 0.4% rise (and the largest jump since August). December’s figure was also revised higher, pushing the year-over-year reading to 4.7% from 4.6% (the first pickup in pace since September). Personal spending rose 1.8% in January, the biggest increase in nearly two years (well above expectations). Furthermore, a resilient consumer was revealed by the University of Michigan’s consumer expectations survey rising to its best level in over a year, while initial and continuous jobless claims declined and came in below consensus. Lastly, sales of new single-family homes reached their highest level since March 2022 (when mortgage rates were 250 basis points lower), an impressive feat before the spring selling season commences. On the back of all of this strong data, good news was interpreted as bad news, with the market selling off and a revision higher in Fed Funds expectations. Currently there is a 27% chance of a 50 basis point hike priced in for the March meeting. There is also a 38% chance that the terminal rate will land in the target range of 5.5% to 5.75% (or higher) and a 0% chance of any cuts in 2023.