Weekly Investment Update

Key Events: Political chaos leads off the year 

After the longest stalemate since 1923, the House of Representatives finally elected a Speaker; a fractured GOP is expected to result in increased Washington gridlock.  

The minutes of the Federal Reserve’s December meeting revealed a couple of key items:  

  1. The markets are missing the Fed’s message: Inflation is here, and they will get it under control. 
  2. Exactly zero officials predicted rate cuts in 2023 

    Market Review: Softening data provides relief. 

    Softening data on Friday gave the markets an excuse to rally.  The S&P 500 finished the week up 1.5% and most markets reported positive returns. Bonds and stocks both did well in this, the first week of 2023, in stark contrast to poor returns from both asset classes in 2022 year we’d all like to forget. 

    Outlook: Disconnect between the market and the Fed  

    Stocks rose unexpectedly when Hawkish Fed minutes were released and as expected when more subdued wage growth data was released. As we have discussed recently, day-to-day movements seem random; expect volatility until the path of interest rates becomes clearer. 

    One source of optimism in light of this week’s congressional chaos is that the third year of the presidential cycle is one of the strongest.  The below chart shows that, since 1929, the third year has averaged 13.5%, while the average return of the first, second and fourth year is 5.7%.[1]  

    [1]Source: Bloomberg, OneAscent Investment Solutions

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