Markets fell in February after robust economic data was released. This may seem counterintuitive - why would markets fall if the economy is doing well?
Simply put, strong data suggests the economy continues to run hot, which means strong demand could lead to stickier inflation.
This means the Fed may need to keep interest rates higher for longer than many investors expect to tame inflation. Bad for stocks in the short term.
We don’t envy Fed Chairman Jerome Powell. He’s between a rock and a hard place. If he continues to raise rates to ensure that inflation has been defeated, he runs the real risk of pushing the economy into a recession.
If he starts to slow the hikes, pause, or even reduce the rate hikes, inflation may stay at unsustainable levels - like February suggested. Time will tell.
As we wrap up this quarterly earnings season, it’s encouraging to see 67% of S&P 500 companies that have recently reported earnings beat analyst expectations for those earnings.
Companies are passing on higher costs to consumers who have proven they won’t back down without a fight.
In terms of winners and losers in February, the energy sector lagged others, while tech was the only sector to finish the month in positive territory.
China’s reopening continues to potentially drive demand trends higher, though the Chinese index fell in the month after geopolitical tensions intensified.
Our view remains the same regardless of how short-term inflation and economic data play out.
We expect choppy markets ahead, and we’ll stay focused on the core fundamentals vs. trying to predict the outcome in the macro.
In terms of our strategies – after a challenging 2022, all four of the Titan managed strategies are off to a solid start to the year. Our team is looking forward to finishing the first quarter strong.
It’s also been great to welcome clients into the new passively strategies: Automated Stocks and Automated Bonds. Both are designed to provide low-cost, tax-efficient, diversified exposure to the equity and debt markets, respectively.
We believe these are complements to our Titan managed strategies as well as the alternatives (such as Real Estate, Credit, and Venture Capital) that our partners manage.
We plan to host an investor call to recap the first quarter in early April, so please keep an eye out for an invite.
As always, we’re here for you so let us know how we can help. See you next month.
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