March 2023 -Not Out Of The Woods

As we enter the month of March and inch towards the end of the 1st quarter, February was a rude reminder that markets are still very much under the influence of the Federal Reserve and it’s continued interest rate hiking campaign.

After a very solid start to the year in January, hotter than expected core PPI data was released on February 16th that surprised markets, took bond yields higher and triggered the selloff we saw in the equities markets -which negated much of the gains we saw in January.

After three consecutive months of declining PPI and CPI data, February’s hotter than expected PPI number, coupled with the tight labor market, (we believe) gives the Federal Reserve enough evidence to warrant another 50-basis point interest rate increase later this month on March 22nd.

Largely, the American consumer and economy remain resilient with over 500,000 jobs being created in January, nearly triple economists’ expectations. The current unemployment rate is at its lowest level since the 1960s. Retail sales rose a better than expected 3% in January month over month, as consumers benefited from the healthy job market and excess savings.

This data (although positive), has led to stronger than expected economic growth, fueling much of the sticky inflation the Fed is trying to contain and reduce. This being the case, rate hikes may extend into the summer and potentially delay (but not derail) the start of a new bull market. Against this backdrop, even though stocks pulled back in February, this year’s modest two-month gain for the S&P 500 Index feels like a small victory.

Taking a step back, looking at the big picture, our outlook for positive 2023 year-end portfolio returns is still very much intact and we remain steadfast in our belief that patience will be rewarded. As I mentioned in our January note, equity markets will remain volatile until the direction and ultimate destination of interest rates become clearer, but new highs will come.

Tactically, regarding portfolio management, we are (and have been) taking the opportunity to scoop up individual treasury bills, agency and investment grade bonds at attractive discounts to their PAR value locking in near 5% yield to maturities to replace or complement our core fixed income mutual fund and ETF holdings (depending on model allocation).

Equities as you know, require more patience. Given, the S&P 500’s -19.64% 2022 return we have some ground to make up, but we remain confident in our individual stock holdings to perform over the long run. We continue to hold and add to individual stock positions all the while looking for new opportunities during market selloffs.

In closing, we’re not out of the woods just yet, but we do see stock indices ramping up this summer as inflation eases and the Fed finally hits the pause button on rate hikes.

We wish you and your family a great Friday evening, and a wonderful weekend!


As always, please reach out to us with any questions or comments you may have regarding your specific situation.


Jaran C. Day, Chief Investment Officer


Griffin Dalrymple, CFP®, Chief Strategy Officer