February 2023 Market Update

Warm winter weather seems to have been fueled by hot January economic data reported in February. Employment, retail sales, manufacturing, and inflation all showed acceleration. Markets fell in sympathy. Why?

Key Observations

• Strong economic data pushed market expectations to 0.5% more rate hikes by year end. While perhaps overdone, this speaks to the end is near on rising rates.

• With 94% of S&P 500 companies reported, fourth quarter 2022 earnings declined -4.8% leaving investors wondering if earnings are the next shoe to drop. While disappointments may produce volatility and opportunity, markets tend to bottom before earnings and waiting for the all-clear horn may be too late.