Weekly Market Update for March 3, 2023

by Jim Ulland

You probably read Samuel Beckett’s “Waiting for Godot” somewhere along your academic journey. The market is relatively range bound as it waits for Godot. Godot, in this case, is a resumption of the decline in the Consumer Price Index (CPI). The February CPI report will come out in two weeks on March 14th. This will be preceded by the February Jobs Report. Remember, last month the report said that a ton of jobs had been created in January, and the market reacted very negatively. The market feared the Fed would raise rates even more than expected in an attempt to cool the economy and thus inflation. The same fears will be present for the February Jobs Report of next Friday. The market does not like uncertainty, so it went down for three weeks in a row in February before moving higher this week. At the close today, the S&P500 was up 1.90% for the week and the NASDAQ was up 2.58%. Economic data was mixed. For instance, pending home sales for January were up 8.1% (bad), but year-over-year sales home were down 24.1% (good). Consumer confidence was down, as were durable goods orders. Tech kept announcing layoffs while restaurants kept hiring. This mixed data will continue until a solid trend of declining CPI is established. US Treasuries are competing with stocks and traditional fixed income for dollars. Normally, investors would try to lock-in current yields as they hover around 6.5-7%. Some of this is happening, and we recommend a higher allocation to our IFI strategy. Yet, US Treasuries of six and twelve months pay over 5% and are exempt from state taxes. That is attractive. Our new IFI-GOV strategy using US Treasuries has seen an in-flow exceeding $20 million since 12/1/22, when it was launched. The next Fed interest rate announcement will be on March 22. Things will be volatile until the downward CPI trend is established. Buckle up. As you recall in “Waiting for Godot,” Godot never showed up. We hope for the arrival of a Fed interest rate pause by this summer. Monday the S&P500 was up +0.31%, Tuesday -0.30%, Wednesday -0.47%, Thursday +0.76%, and Friday +6.61%.  Next week, the big news will come on Friday with the February Jobs Report.

 

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