Month: April 2023

Last week’s release of the March CPI report revealed that inflation remains on its downward path. Headline inflation has dropped materially, falling from 9% last summer to 5% in March, driven in large part by a drop in oil and food prices. Core inflation, which excludes volatile energy and food costs and serves as the more structural measure of inflation upon which the Fed bases monetary policy, rose by an expected 0.4% from the previous month, putting inflation at 5.6% annual rate. This is down from the peak of 6.6% seen in September 2022, but still a long way from the Fed’s 2% long-term target.

The stock market rally took a breather last week. The Dow Jones Industrial Average rose 0.6%, the S&P 500 index dipped 0.1%, the Nasdaq fell 1.1% and the Russell 2000 slumped 2.5%. U.S. labor data came in mixed on April 7th. Nonfarm payrolls rose by 236,000, just below estimates for 240,000 and down from February’s revised 326,000. Private payrolls rose just 189,000, well below views for 223,000. However, unemployment dipped to 3.5%, back to long-term lows. The labor force participation rate climbed to a post-Covid high of 62.6%. Hourly earnings rose 0.3% vs. February, in line.

There could hardly be a more appropriate description for the first quarter of 2023 than the title of the movie that won this year’s Academy Award for Best Picture. It felt like some significant economic shift was happening every time you blinked – a rate hike, a collapsing bank, or a surge in the crypto sphere. In our 2023 Outlook, we had expressed the view that the consensus expectation of a weak first half and a robust second half is unlikely to play out. The market’s performance so far has validated our assessment.