Market Insight

Investors were eager to put 2022 behind them as the clock struck midnight on December 31. After all, it was the worst year for stocks since 2008 and the worst year for bonds - ever. Yet, there was little cause for optimism as it seemed, and still does, that 2023 would not offer a reprieve from the challenges that faced the economy and financial markets last year. Namely - inflation, rising interest rates, and a looming recession. Add to that mix the largest bank failure since 2008, and one would assume that the losses would have extended through this year’s first three months. However, in the world of financial markets, sometimes bad news is good news.

If you’ve ever tried to lose weight, you know the phrase: “The last five pounds are the hardest.” The first few pounds often melt away with relative ease, but shedding those final stubborn few requires effort, discipline, and time. And, sometimes, there are setbacks. Jerome Powell and the Federal Reserve's battle with inflation has reached those stubborn “last five pounds.” While there is still some work to do to hit their 2% target, after peaking over 9% in June 2022, inflation now hovers below 3%, thanks to the easing of supply chains and the Fed’s efforts. Inflation can wreak havoc on an economy and financial markets, so keeping it under control is vital – which is why it is part of the Fed’s dual mandate, alongside promoting full employment.

It’s often said that The President of the United States (POTUS) is one of the most powerful people in the world. The President can influence tax policy, trade, government spending, and regulation, among many other consequential policies not related to the economy. As election day approaches, candidates Harris and Trump are expected to continue highlighting their economic agendas because, as James Carville stated during the Clinton campaign, it's all about “the economy, stupid.”

Surprised at how well the economy and markets have performed lately? You’re not alone. It’s hard to believe that it was barely one year ago when the Wall Street Journal reported that approximately 60% of the economists they surveyed were expecting a recession. In hindsight those predictions seem so far off, leading one to would wonder why those same economists were asked for their opinions again (this time, they put the odds of recession at around 25%). Instead of facing a recession and a stock market correction, we have benefited from a resilient economy and robust financial markets, despite the unprecedented political environment.

According to the National Federation of State High School Associations, almost 600,000 boys participate on high school basketball teams. However, less than 5% of these athletes move on to play at the collegiate level, with a fraction of that, less than 1%, competing on Division I teams - the highest level . Despite their exceptional skill, only 1% of Division I players manage to reach the NBA , which employs around 550 players across all teams. The trajectory for female basketball players follows a similar pattern. Simply labeling professional basketball players as "the best of the best" fails to capture the extent of their talents and the obstacles they've overcome. Among this elite group are about two dozen individuals with extraordinary abilities – the All Stars.

Though it’s difficult to measure, 2023 may be remembered one of the worst years ever for economists and market forecasters. As the clock struck midnight on New Year’s Eve this past year, even the oft maligned weather forecaster looked like a seer when compared to the most followed financial prognosticators. Forbes labeled 2023 as “The Year of Terrible Market Predictions” with Business Insider echoing that sentiment in an article titled “Stock Market Gurus Predicted a Grim 2023. They were Dead Wrong.”