Perhaps, the single biggest surprise of this past week was the January CPI(consumer price index) data. After several months of lower than anticipated inflation, the recent data from January came in slightly higher than expected. There were slight increases across the board in the cost of shelter, food, and energy, fueling more speculation that the Federal Reserve may need to increase their funds rate further in the months ahead. The fight to slow inflation rages on! The futures markets are currently pricing in another .25% increase on March 22. Even Goldman Sachs is now predicting 3 more rate hikes by the end of 2023.
We also saw hotter than expected retail sales numbers come in for January. Those numbers jumped 3% in January, topping Dow Jones estimates of 1.9%, far exceeding what was expected. Inflation, what inflation?! For now, the consumer continues to plow forward in the face of higher inflation, giving the Fed even more reason to consider more rate increases. With so much data to digest this week, the markets took a breather from their recent run upward. While the year has started off on a better footing, it’s to be expected to have some pullback in the face of these latest headlines.
Over the recent weeks, we continue to be asked about our near-term views of where the economy is headed. If there is one thing I am certain of today it’s that it is simply too early to tell how this will all play out. Will our economy land softly or hard as a rock? Will consumer spending continue to support the economy? Will unemployment ever get to a level the Fed is content with? Even the brightest economists on Wall Street remain divided on these topics. One thing I do know is that we are likely to be in for more volatility in the near-term as more data is produced and the potential for more rate hikes remains. I still believe firmly that by early summer we will have a better handle on the direction for the 2nd half of the year.
What I also know right now is that staying the course from last year has served us well starting off 2023. I spoke regularly last year about the hard-hit tech sector and the NASDAQ Index which tracks many of those large tech companies. For 2022, the NASDAQ index was negative by more than 32%! Year-to-date through February 16th, it has gained about 15% so far. This is a reason why we stay invested in high quality companies, even in the toughest of times. Although this doesn’t always hold true for every investor or situation, it does illustrate that often times we simply need to ride through the noise and understand the bigger picture. Pivoting and adjusting course is essential from time to time under the right conditions but change for the simple fact of changing is hardly ever a wise decision. The weeks and months ahead may seem uncertain, but the destination remains the same. Your plan is your plan, it’s not the same as your neighbor or colleague. That’s why it is important to have your own, custom designed and tailored to fit your needs and goals!
Have a nice weekend!
Christopher E. Wasson, CFP®
Mosaic Asset Partners, LLC
1122 Kenilworth Drive, Suite 310
Towson, MD 21204
410.821.0089 fax 410.821.5993
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The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.