Weekly Market Updates

LATEST EQUITY ASSET ALLOCATION VIEWS

THE FED’S MESSAGE IS GETTING THROUGH AS MARKETS RECALIBRATE

THE FED’S MESSAGE IS GETTING THROUGH AS MARKETS RECALIBRATE

STRONG JOB MARKET SUPPORTS CASE FOR SOFT LANDING

Recent economic and market data have reignited conversations about a potential soft landing. As we wrote in Midyear Outlook 2022: Navigating Turbulence, the ongoing economic recovery from the global pandemic required businesses and consumers to pilot the economy into a soft landing but that path would go through turbulence. As we subsequently developed Outlook 2023: Finding Balance, we thought the markets would be choppy as the world found its balance, while we waited for inflation to decelerate and central banks to ease up on their rate hiking campaigns.

INTERNATIONAL EARNINGS OUTLOOK IS IMPROVING Earnings are, of course, the bottom line, so when looking at an equity investment we certainly can’t ignore earnings. The U.S. has been the clear earnings leader relative to international for the past decade, but the tide has recently turned. International earnings slightly outgrew U.S. earnings in 2022, (7.7% vs. 5.4% based on the latest estimates) and we believe international earnings may hold up slightly better in 2023 than the U.S.—it may be a 1-0 game, (a pitcher’s duel for you baseball fans) but the U.S. is no longer the place to go for earnings growth.

LESSONS LEARNED: ECONOMIC FORECASTS

The Fed’s bark was as bad as its bite!

The Fed’s bark was as bad as its bite! Investors have been carefully dissecting Federal Reserve (Fed) officials’ words for decades, and depending on the composition of the Federal Open Market Committee (FOMC), its bark is often worse than its bite. But this time was probably different. One of the lessons learned in 2022 was to never underestimate our central bank’s resolve to squelch inflation. Another corresponding teachable moment was never overestimate the speed of price declines.