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- A Q1 2023 Market Lookback
A Q1 2023 Market Lookback
“There are decades where nothing happens; and there are weeks where decades happen.” — Vladimir Ilyich Lenin
We’re in the “weeks where decades happen,” right? Or is that just me?
Every week there’s another major headline or two. Ones that completely change the narrative. Ones that make you second guess whether we’re out of this mess. Or what part of the economic cycle we’re in. Certainly ones that make the mainstream talking heads look foolish.
It’s not just this year, though.
I remember us all saying, “2021 can’t be as crazy as 2020,” and “2022 can’t be as crazy as 2021.”
We said the same thing heading into this year.
Yet here we are… with one of the biggest banking collapses in nearly 100 years. And it’s just the first quarter of the year.
A lot of it is due to the markets not believing the Fed (Federal Reserve) would actually raise rates, despite continuous forewarnings.
We wrote about this back in June 2022. Here’s what we said in The Fed Isn’t Going To Stop… (emphasis added):
“The asset carnage isn’t likely to be over.
And the Federal Reserve doesn’t care how much more wealth of yours they have to destroy in order to get inflation back to their 2% mandate.
Federal Reserve Chairman Jerome Powell made that very clear during his press conference last Wednesday… after the Fed raised interest rates 75 basis points — the most since 1994:
Powell also said:
You see, the Federal Reserve committee and the entire U.S. government have a lot of egg on their face.
They’ve been saying inflation was transitory throughout all of 2021 and early 2022.
They can’t deny it anymore. Inflation hasn’t come down. It’s accelerated.
Meaning they will do whatever it takes to bring it down… and save their credibility…
…Unemployment stands at 3.6% as of May 2022.
If Tom Hoenig (former Kansas City Fed president) is right, another 2+ million people will lose their jobs before the Fed even thinks about pausing the interest rate hikes.
That’s what “whatever it takes” means.
Mike and I aren’t macroeconomists. We’re not in the business of predicting recessions.
We’re simply pointing out that the Fed is hellbent on tackling inflation.
And [its members] are willing to destroy people’s wealth until they see inflation abate.
That means lower stock prices. Lower bond prices. Lower crypto prices. A housing cooldown. Alternative asset cooldowns…
…Because the truth is, we’re truly in uncharted territory. Volatility isn’t going away anytime soon. And anyone predicting they know where and when the bottom is… is guessing or lying.
Survival is what’s most important in a market like this. We’re seeing the layoffs and corporate bankruptcies right in front of our eyes. With more to come.”
As expected, the Fed has stood by their word and hiked rates while the market has gotten it wrong time and again… including this year, too.
As expected, the layoffs and bankruptcies keep coming.
According to Silicon Valley tracker TrueUp:
“So far in 2023, there have been 702 layoffs at tech companies with 210,749 people impacted (2,451 people per day). In 2022, there were 1,535 layoffs at tech companies w/ 241,176 people impacted.”
The mantra was “don’t fight the Fed” when rates were at zero… yet the markets have fought with the Fed every step of the way during their current rate-hiking cycle.
It doesn’t make sense.
The markets ripped in 2023. The S&P 500 was up nearly 7% in January alone. The Nasdaq was up 11.5%.
The market was shrugging off all warnings and red flags as if everything was back to normal.
It wasn’t.
We warned readers February 7th in our missive Something Doesn’t Feel Right.
The S&P 500 is down 5% since. Which is pretty minimal considering we’re seeing continued fallout from the Fed’s hiking cycle — i.e. bank runs.
There’s three things we know for certain heading into Q2 and the rest of the year.
No one knows anything. All predictions will look foolish soon enough.
Mr. Market will cause the most amount of pain to the most amount of people most of the time.
Do whatever you need to do with your portfolio to sleep well at night.
Good investing,
Lance