The Pulse on the Economy and Capital Markets: January 16 – 19, 2023

At a glance

• The markets started 2023 on a positive note as inflation data has been surprisingly tame leading investors to believe a mild recession could tempt the Federal Reserve to pivot away from interest rate increases. 
• Stocks and bonds were up globally, and international markets continued their 4th quarter streak outperforming US markets, which have remained mostly positive. 
• Leading economic indicators for US, Europe and China continue to point towards a recession, however, the high yield bond market is signaling a mild, not deep, recession is likely.  
• Consumer sentiment is mixed, despite large banks stating consumers are in good shape due to a healthy labor market, high savings and credit quality that is stronger than pre-pandemic levels. And yet, lower- and middle-income consumer sentiment continues to skew negatively. 
• It’s this perspective that has us keeping a close eye on the services segments of the economy, which are closely tied to consumer sentiment. 
• As it relates to industry news, we’re reading about how inflation adjusted housing prices are 3.8% below peak, tech companies lay off more than 70,000 employees in the last year and Adobe online prices fall for the fourth consecutive month.

Related resources:

• Inflation Adjusted House Prices 3.8% Below Peak
• Google, Microsoft, Amazon and other tech companies have laid off more than 70,000 employees in the last year
• Adobe Digital Price Index: Online Prices Fall for Fourth Consecutive Month, Dropping 1.6% in December