Our friendly fear indicator, the VIX, eased back considerably this week to just under 20 (normal range is 12-20), indicating that some normalcy is returning again. A quiet week, in general, was welcomed after enduring some painful days and news headlines recently. Even the indictment of our Past President did little to spook things to close the week. The banking contagion fears have subsided considerably although I’m sure we will still hear about this for some time. It is clear that more stringent regulation and oversight is needed across the smaller and more regional banking systems. I suspect that the regulatory environment will put in additional capital reserve requirements, similar to the expectations placed on much larger banks, to avoid these types of scenarios in the future. It never surprises me how history repeats itself, and this situation, while different from the financial crises we experienced more than a decade ago, illustrates the need to look wider and deeper. Let’s hope we learn our lesson this time.
The core Personal Consumption Expenditures index, which excludes energy and food costs, rose 0.3% in February, less than the 0.4% expected by economists polled by Dow Jones. This helped to propel us slightly higher to close the week and the quarter. With March now officially in the books and the 1st quarter of the year behind us, we can begin to look forward (more on that topic and a recap will come next week) to what the Spring will hold for us. For now, here is a sneak peek of a few of the “key” metrics we are watching in the weeks ahead:
April 3rd – ISM Manufacturing / previous 47.3 - forecast is 49.3 (A PMI above 50 indicates an expansion of the manufacturing segment of the economy compared to the previous month. A reading of 50 means no change. A reading below 50 suggests a contraction.)
April 7th – U.S. Unemployment Rate / previous 3.6% - forecast is 3.6%
April 12th– Core CPI Inflation / previous 5.5% - forecast 5.5%
May 2-3rd– FOMC Meeting (Federal Reserve / interest rate decision)
While this list is far from complete, it simply highlights that we will have another full month of economic data to digest before the Federal Reserve meets again in early May. From now until then, we will also be flooded with a wide range of corporate earnings announcements. I believe these first quarter earnings will be an important gauge of consumer behavior as well. Will habits have been altered as inflation remains elevated? Or will spending habits and consumption continue to plow forward and ignore the higher costs? A lot will unfold in the coming weeks.
As we head into the shortened Easter week ahead, more quiet days would be welcome. A healthy pause or even a slow, steady climb higher sound good right now. In honor of baseball season kicking off, I’d like to think we are in the 7th inning stretch right now. It is good to stand up, stretch your legs and then settle in for the last few innings of the game. As we know all too well sometimes, there is still plenty of game to play. The outcome is far from determined. But that is ok, that is to be expected. For those of us that support the Orioles, there should be much more to cheer about this year. A younger team brings new excitement and energy. My hope is the same for our financial markets. Getting to the other side of this interest rate and inflationary mess will have forced many companies to right size, plan better, and reinvent themselves. Let’s just hope the grizzled veterans of our political and economic establishment don’t stand in the way of this new wave of energy.
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.