Filter out the noise and stay the course
- Broad asset classes rose higher off 2022 lows on cooling pricing pressures and the possibility of a Fed pause
- Equities abroad outperformed amid a declining U.S. dollar and higher than expected growth
- The U.S. debt ceiling has sparked conversation, however the need for a resolution will likely abate an insolvency crisis
Broad asset classes kicked off the new year higher after a not-so-jolly December. Sentiment turned decidedly positive based on slowing wage and job growth and cooling price pressures. These trends provided optimism for a less hawkish Fed pushing investor expectations from a 0.50% Fed move in February to a 0.25% as of January 31, 2023. Optimism was tempered as investors assess how the economy is weathering higher interest rates, with retail sales and producer pricing showing signs of slowing in the U.S. economy. While these appear to be signs the Fed’s fight against inflation may be working, investors continue to weigh the economic cost and viability of a “soft landing” scenario.