With this, as we revisit the first quarter of 2023 and craft our forward-looking outlook, a lot of what we anticipated at our last writing is coming to fruition: inflation will contract, but slowly; labor markets had a long way to go to crack; the Fed will keep their tough love modus operandi policy of raising rates; the longest predicted recession in history might not show up as soon as everyone was predicting; and finally the markets will bounce around. We also indicated unknown events might rock the markets, with the regional banking challenge requiring intervention from the Federal Reserve and the Department of the Treasury, and testing investors.
As the weather, and we, ‘spring’ ahead, the predictions of the first quarter need to make way for new thoughts starting to bloom. While the never predictable markets have again surprised during 2023, this time with market leadership from an asset category which should hibernate during challenging times, growth stocks, our thought is this flower might have bloomed just a bit too early. Manufacturing and labor are starting to show some signals of slowing, which are the early buds of a slowdown starting to form. However, while these indicators can help to form a template for the future, the past three years of extremely unique times, and a decade and a half of suppressed interest rates (excluding 2022!), clearly tell us there is no skipping school around here.