Broadly, 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% move as of January 31, 2023.1 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.
The Debt Ceiling Distraction
Historically this budgeting statute has been more procedural than material. However, recent rising debt-to-GDP levels and partisan politics turned procedure into brinksmanship; and similar standoffs in 2011 and 2013 resulted in market volatility. In all, we believe manufactured crises like these are more noise than a signal when it comes to a sound investment strategy. Since 1960 the debt ceiling has been raised 78 times. At times the debt ceiling has brought brief moments of volatility to markets, however this issue has always been resolved without creating lasting systematic issues.
We believe elevated volatility, moderating inflation and markets finding a bottom following the performance of markets in 2022 will be key factors to position portfolios in 2023. Headline CPI data in January continued the trend of lower inflation. It is perhaps too early to claim victory on price stability, however, these are steps in the right direction. As for what inflation and higher rates are doing to company earnings, those impacts are just coming to the surface with the majority of fourth quarter 2022 earnings data being released in February. The barrage of layoff headlines in sectors most impacted in the recent pullback may be an early signal of what is to come from the final quarter of 2022. This incremental information continues to support our positioning of building greater resiliency in portfolios while positioning for upside potential.
US Capital Wealth Advisors, LLC (“USCWA”) is a Texas-based investment advisory firm registered with the United States Securities and Exchange Commission (“SEC”). As an independent, fee-only, registered investment advisor (RIA), USCWA is able to provide sophisticated, holistic wealth management services, with expanded access to investment solutions. We take our fiduciary responsibility to you seriously, which means we are committed to what is in your best interest. Our long-standing objective is to enable you to achieve your financial goals and to act as a trusted resource for you and your family.
This material is for informational purposes only and is an overview of the capital markets and is intended for educational and illustrative purposes only. It is not designed to cover every aspect of the markets and is not intended to be used as a general guide to investing or as a source of any specific investment recommendation. Readers should conduct their own research before making any investments. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument, investment product or service. In preparing this material we have relied upon data supplied to us by third parties. The information has been compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made by US Capital Wealth Advisors, LLC, as to its accuracy, completeness or correctness. US Capital Wealth Advisors, LLC does not guarantee that the information supplied is accurate, complete, or timely, or make any warranties with regard to the results obtained from its use. Opinions included do not necessarily represent the views of US Capital Wealth Advisors, LLC. Please see USCWA’s ADV Part 2 for more information about USCWA.