We hope this blog finds you well and you are enjoying the “heart” of tax season as much as I am! During the month of February, I had the unique opportunity to sneak down to Florida for a few days to watch Channing play in a National Golf tournament. Although he did not play up to his own expectations, it provided us a great chance to discuss resiliency and resolve. This discussion immediately came in handy as we missed our flight home due uncontrollable circumstances. As I have highlighted many times in my monthly commentary, the last 33 months have certainly provided many opportunities for everyone to grow in their own resilience and resolve. After January provided a decent relief rally in the markets, February was provided with its own opportunity to show resolve & resiliency.
February began just as the prior month finished, with many investors becoming more comfortable with declining inflation, strong job’s data, a slight 0.25% rate increase from the Fed and an overall feeling of things beginning to move in a more calming direction. Those feelings changed sharply by mid-month as inflation, which is gauged by the CPI report, rose 6.4% compared to the same period last year. This surprised the markets and was significantly out of line with the consensus expectation. Coupling this CPI figure with a few major earning calls in which some retailers questioned the overall health of consumers, we saw the markets get rattled. The DOW Jones ended the month down -4.19% and the S&P500 also finished down -2.61% for the month. Real Estate (-5.86%) and Energy (-6.94%) led the sector's declines.
Our expectation is that we will continue to see conflicting data at every turn as the FED tries to digest the first 2 months’ worth of data to the proper course for taming inflation. I believe we are seeing some resiliency in the markets because so much bad performance was already baked in over the last 14 months and many companies are now long in the tooth of tightening their belts (efficiencies). All eyes will be closely watching employment data, personal consumption figures and the communication coming out of the 2-day Fed Meetings on March 22nd for any indication of course correction in the path forward. The month of March will provide us with the next piece of the puzzle into the Federal Reserve psyche of how long rate increases will be warranted.
