Weekly Market Update

“If the data were to continue to come in stronger than we forecast. And we were to conclude that we needed to raise rates more than is priced into the markets...

We would certainly raise rates more.”

~ Jerome Powell during his Economic Club of Washington appearance on February 7, 2023

The market continued to digest last Friday’s blowout jobs numbers and with Jerome Powell emphasizing data dependence on Tuesday, stocks and bonds moved lower on the week as a much stronger than expected labor market strengthened the higher interest rates for longer narrative and weighed on investor sentiment.  As a result, growth stocks which have been notable outperformers to start 2023, stumbled and investors rotated to many of the more value oriented and defensive areas that held up better last year such as utilities and healthcare stocks.  Ultimately, however it is not uncommon for stocks to be weak in February, especially after strong January returns.  Next week, while there are a variety of important data points such as retail sales and producer price index (PPI), all eyes will be on Tuesday’s consumer price index (CPI).  The consensus estimate is for 6.2% year-over-year headline inflation (per FactSet), down from 6.5% in December and we expect a rather binary market response.  Anything below 6.2% will be cheered and the next leg for markets will likely be higher, anything above 6.2%…buckle up for market volatility.

MARKETS ROOTING FOR KC?

On Sunday the Philadelphia Eagles faceoff against the Kansas City Chiefs in Superbowl LVII and while we write this purely in jest, and would never advocate investing based off sporting events, it is rather amazing how bad markets have been following Philadelphia championships (the Athletics played in Philly from 1901 to 1954).  In addition, since the Philles lost the World series to the Houston Astros in November 2022 the S&P 500 is up over 7%...

Ian G. Browning, CFA
Managing Director, Investment Strategies | Shareholder

Thanks to our clients and friends who have referred business to us over the years. 

Your endorsement has been the cornerstone of our growth and our greatest compliment.