2023 - New Year - new market drivers

What goes up must come down, and after bearing witness to the sharp incline in inflation in the latter part of 2021, we are now experiencing a revving down of inflation rates, which may lead to a pivot. However, it’s the news that may be the catalyst behind this turn as opposed to a federal reserve interest rate. 

The rise in inflation in late 2021 has caused the market to be held captive by every unemployment and Consumer Price Index report and Federal Reserve meeting minutes. 

This is understandable based on the most recent CPI report on Thursday which indicates continuity in the short term. The figures of 6.5% in December (a rise from November’s decrease of 7.1%) and the core CPI, an increase of 5.7% were both expected. 

Subsiding inflation indicates lower rate increases by the federal reserve- somewhere in the bracket of 25 basis points at Feb 1st meeting. 

In the interim, the labour market maintains its strength which sets the stage for a soft landing. A soft landing is characterized by low inflation but with a stable economy. Typically, the fed would be on high alert with rates if the market gave any sign of anything positive economically. However, if this current trend continues, and the fed doesn’t push too much, we could be in for a pleasant surprise in the upcoming months. 

This content is provided for general information purposes only and is not to be taken as investment advice nor as a recommendation for any security, investment strategy or investment account.