News From the Control Tower - 2/1/2023
News from the Control Tower: Our weekly curated list of news stories affecting you and your finances.
Reading the tea leaves --Amanda Vaught
As I recently wrote in our firm’s monthly newsletter, stocks and bonds became correlated over the course of 2022. Part of the reason for this was the Fed’s significant rate hikes in the face of a slowing economy. Will 2023 be the same? So far it looks like 2023 will be different, and The Wall Street Journal this week highlights how stocks and bonds are starting to decouple.
Why is this? In 2022, good news on the economy gave the Fed more leash to raise rates even higher. Now that the Fed has signaled their intention to dial back on rate hikes, good news on the economy can just be good news again. And rate hikes can send the price of bonds down, while sending the price of stocks higher.
Streetwise: Investors have begun moving away from their obsession with inflation, shifting markets into a new regime where good news on the economy is again good news for stocks
In contrast, Paul Krugman‘s column this week points out that the majority people are not recognizing that the economy is doing well. Yes, perception can drive economic activity, but to us it looks like at least one group of people is responding to good economic news: investors.
Stagflation or Soft Landing? It Depends Who You Ask.
As we read the tea leaves of the Fed’s actions and how the market is responding, it’s good to consider this recent post on Twitter from Nick Timiraos of the Wall Street Journal – showing just how wrong the experts were at predicting the Fed’s moves in 2022.
“As Yogi said, it’s tough to mark predictions, especially about the future.” Nick Timiraos on Twitter
Finally, a fun article featuring the barge cats that advisor David Vaught lived with on the Hudson River in 1970s New York City.