Market Recap - February 2023

Jeff McClenning |

Hitting the economic gas pedal stymies stocks

“Usually, recessions sneak up on us. CEOs never talk about recessions,” economist Mark Zandi of Moody’s Analytics said at the end of 2022.  “Now it seems CEOs are falling over themselves to say we’re falling into a recession. ...Every person on TV says recession.  Every economist says recession.  I’ve never seen anything like it.”

What’s behind the gloomy talk?  The Federal Reserve’s rate-hike campaign hasn’t been this aggressive since 1980.  Closely watched leading indicators such as the Conference Board’s Leading Economic Index are signaling that a recession is all but inevitable this year.  An inverted yield curve (longer-term bonds yield less than shorter-term bonds) has been a reliable warning sign.  The curve inverted last year.

However, if we were to put six economists in a room, we’d find ourselves listening to no less than ten opinions!  Just for the record, Dr. Zandi is not in the recession camp.  That said, the economy took a curious and unexpected turn as the new year began.  Nonfarm payrolls jumped by over 500,000 in January per the U.S. BLS, surprising nearly everyone.  Taking advantage of cost-of-living raises and an 8.7% rise in the cost-of-living adjustment for Social Security, consumers went on a spending spree in January.

Good news on inflation last year failed to carry over into early 2023.  Moreover, upward revisions for the final months of 2022 suggest that the road to price stability may take longer than many had expected.

What does this mean?

Stocks rebounded in January amid hopes the Federal Reserve was nearing the end of its rate-hike cycle.  A more flexible-sounding Jay Powell added to the encouraging mood.  However, the strong economic start to 2023 is forcing a reevaluation of the early optimism on rates, and last month investors reacted accordingly.

Could the economy sidestep a 2023 recession?

The rise in incomes isn’t going away. Further, Goldman Sachs estimates that about 65% of the fiscal stimulus checks and government payments received in 2020 and 2021 have yet to be spent, providing additional fuel for continued economic growth this year.

Are leading economic indicators failing to account for the mountain of cash that remains on the sidelines?  Never has Congress been so generous with fiscal support.  Cash that was socked away in bank accounts helped many bridge the gap between wage hikes and inflation last year and could continue to do so well into 2023.

Perhaps January’s strong start was just a one-month aberration.

But the most recent data have complicated the Fed’s job, as stronger economic growth may lead to significantly more rate hikes than were expected just a few weeks ago.

Table 1: Key Index Returns




Dow Jones Industrial Average



NASDAQ Composite



S&P 500 Index



Russell 2000 Index



MSCI World ex-USA**



MSCI Emerging Markets**



Bloomberg US Agg Total Return



Source: Wall Street Journal,, Bloomberg

MTD returns: January 31, 2023 – February 28, 2023

YTD returns: December 30, 2022 – February 28, 2023

**in US dollars

I trust you’ve found this review to be educational and helpful.

If you have any questions or would like to discuss any matters, please feel free to give me or any of my team a call.