- The stock market seems to be looking for its next catalyst to move higher or lower, but there hasn’t been any definitive data either way.
- Headlines point to recession as economic activity, based on incoming data, suggests a slowdown that’s gaining momentum.
- Banks have begun to tighten lending standards that were already fairly conservative. The Philadelphia Reserve Bank of Philadelphia issued a report indicating 15 states already have negative growth.
- Still, despite data pointing to a downturn in personal consumption, there are the anecdotal reports of parking lots filled to capacity as consumers continue to search the aisles for markdowns. But credit card use is rising and consumer saving is declining, so are folks just spending on credit? And how long can that last?
- The Treasury market’s inverted yield curve scenario seemed to unwind somewhat. That certainly would have been a positive move for equities; however, the 3-month Treasury bill relationship with the 10-Year Treasury note has reversed course, and the inversion remains intact. The 3-month, 10-year relationship enjoys a stellar track record in predicting recessions.
- The manufacturers purchasing index is showing a slow down. Perhaps that means that manufacturing is slowing due to a slower demand picture. Maybe supply has finally caught up with demand?
- Q4 earnings season will likely give us a clue about the strength of sales and what companies are forecasting for 2023, and it cannot come fast enough. The guidance from companies offers a broader perspective on what they are seeing from their own customers and clients. This should help markets position more decisively. Positive surprises can help assuage the gloomy atmosphere.
- And then there’s Congress, budget deadlines and a rising debt service level not seen since the post war era in the 1950s. Don’t expect government spending to bail out the economy. But we do expect military spending to remain high as geopolitical conflicts continue.
- All in all 2023 seems to be lacking direction so far and many investors are waiting on the sidelines for a sign one way or the other.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.