Previously in the Market
February 2023: Rescheduling That Retrechment
“Storms make the oak grow deeper roots.” – George Herbert
Positive economic developments over the last several weeks have pushed recessionary prospects further into the future. While uncertainty remains, prospects for a soft landing have increased. We acknowledge that the recent move carries a too fast, but not too far, feel, and that some consolidation seems logical. However, a steady stream of improving datapoints should keep long-term investors engaged. We remain guarded, but optimistic.
March 2023: Contagion Cogitation
“People generally see what they look for, and hear what they listen for.” – Harper Lee
The remarkable bank shutdowns over the past week are justifiably raising concern over possible contagion within the financial system. While our base case assumes the worst outcomes will be avoided, the bar for improving investor confidence is now prudently high. Encouragingly, growth is holding up better than feared and as evidenced by the recent fallout, we suspect financial conditions have been tightened enough.
April 2023: The Storm Before the Calm?
“It's in vain to recall the past, unless it works some influence upon the present.”
– Charles Dickens (David Copperfield)
Having shifted from recession fear in January to overheating worry in February, the market has had to shift focus sharply again to contend with banking stress and credit crunch fears in March. Add endless Fed policy debate into the equation and to say the year has started out in dramatic fashion would be an understatement. Yet, stocks have managed marginal gains, and equity market volatility metrics are down. What gives?
May 2023: Confidence Game
“It's better to look ahead and prepare, than to look back and regret.” – Jackie Joyner-Kersee
Markets are in confidence limbo, torn between peak rate hopes and recession fears. Resilient earnings, stabilizing yields and cautious investor positioning are reassuring and supportive of the near-term set up. However, the growth outlook remains uncertain given the tighter liquidity backdrop and nagging uncertainty surrounding the debt ceiling. How will the confidence game play out?
June 2023: More Participation, Less Agitation
“Yesterday is gone. Tomorrow has not yet come. We have only today. Let us begin.”
– Mother Teresa
Markets have been resilient, overcoming plenty of macro volatility with encouraging price gains. However, they are historically narrow with the proportion of returns attributable to the largest five stocks greater than any other year over the last two decades. We suspect more participation would lower investor anxiety. Will the market broaden out?