Here's to a Better 2023
Even though a new year is upon us, the U.S. stock and bond markets continue to focus on the Federal Reserve and what lies ahead with monetary policy. The fed fund futures are pricing in interest rate increases of ¼ % in February and March. If that is the case, that will take the fed funds rate to 5%. For a point of reference, the fed funds rate in January 2022 was ¼%. As stated previously, this has been the most aggressive Federal Reserve in history. The Federal Reserve is targeting demand and is intentionally trying to slow the economy down. The December consumer price index will be released next week. We expect it to show a decline in inflation year over year and month over month.
Fourth-quarter earnings start rolling in over the next several weeks. We anticipate corporate earnings to reflect an economic environment of higher interest rates equating to slower growth. While interest rates overall appear high relative to 2021, historically they are still accommodative for new investments throughout the economy.
Volatility with both, stocks, and bonds, will stay with us in the first half of this year. While pessimism and negativity remain at thirty highs, markets often fool the masses. Since 1950, 20 years out of 73 years the stock market has seen a gain of 20% or more. That’s roughly 27% of all years the market gained at least 20%. One caveat, to receive those gains, you must be invested. It is probably more important now than ever before to remain patient and disciplined. It has rarely served any investor well to chase past performance, especially when coming off an emotional year like last year. We are positive and looking for opportunities in high-quality stocks and bonds.
The views expressed are not necessarily the opinion of Cadaret Grant, and should not be construed directly or indirectly, as an offer to buy or sell any securities mentioned herein. Investing is subject to risks including loss of principal invested. Past performance is not a guarantee of future results. No strategy can assure a profit nor protect against loss. Please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice.