Recent News
Current Thoughts and Comments |
March 3, 2023
February market review
Dear Clients and Friends of the Firm:
In other contexts, a string of positive economic data, including reports on jobs and retail sales, would provide a tailwind for equities. In these inflationary times, however, the specter of the Federal Reserve’s (the Fed) commitment to cooling the economy via higher interest rates has made any good news suspect.
The major stock market indices reflected this tension until a key measure of inflation provided the bad-enough news needed to seemingly convince the market that the Fed will continue toward a higher interest rate regimen. Thus, February’s hopes of building on January’s gains ended, and the S&P 500 closed 2.61% down for the month.
“While the Fed probably still has some more work to do, we continue to believe that the end of the tightening cycle is near,” said Raymond James Chief Investment Officer Larry Adam. “We would also note that the continued and recent strength in the economic data mitigates the intensity of the expected recession.”
Let’s review our year-to-date numbers and get to the details.
Balloons and semiconductors
Tensions between the United States and China remain high, strained additionally with the discovery of what U.S. officials described as a Chinese spy balloon floating over the United States. Further, the United States has made moves to curtail the growth of China’s domestic advanced technology sector by signing agreements with the Netherlands and Japan to restrict the export of advanced semiconductors.
Unraveling the Russian energy knot
February brought additional evidence that Europe is successfully detangling itself from Russian natural gas, which had once been seen as one of the Kremlin’s most important geopolitical trump cards. By the end of the month, prices fell to 18-month lows, meaning Europe has found a way forward with almost no Russian gas supply. Increased imports from the United States and Qatar, adaptations in the industrial sector and the expansion of renewable energy have enabled Europe to fill the gap.
Treasury yields rise
Bond yields reversed course as the stronger-than-expected economic data caused the market to remove rate cuts priced in the second half of the year, driving the 10-year Treasury yield back toward 4%. The two-year Treasury yield is also up to 4.81%, a new cycle high.
Debt ceiling talks continue
As the U.S. Treasury continues its “extraordinary measures” to keep paying the nation’s debts, legislative and executive leaders continue to negotiate a resolution to the debt limit debate. Typically, one wouldn’t expect a full resolution until nearer the point the Treasury runs out of runway, which may be as early as July.
The bottom line
A technical analysis of the equity markets shows characteristics of a market attempting to recover from bear conditions. Still, inflation and the response to it will likely remain the dominant market mover, and a lack of clarity will drive volatility. Short-term, expect this uncertainty to continue, but in the long view, it’s worth noting that the economy here and globally has shown remarkable resilience.
Thank you for your continuing confidence in our guidance as we work together in support of your financial goals. If you have any questions about your investments, your financial plan or the state of the market, please feel free to reach out at any time.
On a Personal and Fun Note - Celebrate the eternal hope of spring
Bid farewell to Old Man Winter. Spring arrives for the Northern Hemisphere on March 20th, bringing with it the unmistakable first signs of nature’s renewal. In many places, trees and flowers are already in full bloom. Animals come out of hibernation and shed their winter coats. Warming temperatures beckon us outside. And birds fill the air with song to create the soundtrack of spring.
The first day of spring is also known as the spring equinox, when the amount of daylight and darkness is approximately equal. The name equinox actually comes from Latin words which mean “equal night” – aequus (equal) and nox (night). Equinoxes are the only two times a year that the sun rises due east and sets due west for all of us here on planet Earth.
So enjoy the increasing sunlight hours and later sunsets. We hope the first day of spring brings bright sunshine, warm temperatures, and a happy song in your heart as you celebrate the season of renewal.
Please note that our office, along with the financial markets, will be closed on April 7th, for Good Friday and will reopen on Monday, April 10th. Of course, you can access your account(s) using Client Access anytime, year-round.
Sincerely,
Tricia L. Tripp, CPA, CFP®
Financial Advisor
Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment Advisory Services are offered through Raymond James Financial Services, Inc. Tripp Financial Consultants, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services, Inc.
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