Since late January we have been pretty adamant about the risk of extrapolating the sizeable gains that were experienced in markets at the start of the year. In our view, such moves were not healthy, especially since many of the assets that rebounded were the sectors that did poorly the prior year. As they say, bull markets are not built on the prior leaders (turned losers). Over the past few weeks, via our commentary as well as on various mediums (podcasts, traditional financial news as well as social media) we warned that it was likely that we would give back a decent chunk of the January gains. Well, that is indeed what has transpired over the course of February. So, January giveth, February taketh! In the end, all that 2023’s market action has taught us is that we are in a “data dependent range trading environment”. Which is a.) both a mouthful to say and b.) hard to actually do on a month in, month out basis. For those reasons we keep an open-mind about what lies ahead in March. We can either see the trend continue to even lower prices in stocks, credit and govies or some small mean reversion within a broader trading range. But a lot of that will “depend” on the data leading up to the March FOMC meeting. And then of course how the Fed incorporates all that has happened since the start of the year.
