Overview

The monthly consumer inflation rate slowed slightly to 0.4% in February from 0.5% the previous month, enough to push the annual rate of inflation down to the lowest since mid-2021.

- Housing costs accounted for over 70% of the increase in February and were the largest contributor to the monthly growth rate. This component will not likely be a significant driver of inflation by year end as more multi-family units come to market.
- Headline annual inflation rose 6%, the smallest increase since September 2021 and should reassure investors that inflation will cool further in the coming months.
- Food inflation rose 0.3% in Februa...
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While concerns about the debt ceiling have been increasing, markets, businesses, and the economy are likely to see only minimal impact until we are days, or maybe a few weeks, from the “x date,” the date on which the federal government will no longer be able to meet all its obligations, likely in the summer or early fall. We continue to believe the chances that Congress will fail to raise the debt ceiling before the x date remain extremely low, but current political dynamics have likely increased the risk and there are some negative consequences to even an eleventh hour agreement, as we saw in 2011.

Debt ceiling drama

The sharp rally in U.S. equity markets has created many skeptics, given the size and scope of the advance. As of February 2, the S&P 500 is up 8.9% year to date, marking its best start to a year since 1987. The big question now is if ‘this time is different’—meaning is this another head fake, or have stocks actually reversed course from a dismal 2022. Fortunately, technical analysis can help investors answer this very important question.

As shown below, the S&P 500 developed a downtrend starting in January 2022. The connecting series of lower highs acted as a dynamic resistance area throughout last year.

The first month of 2023 is now behind us and it felt very different than 2022. In 2022, the S&P 500 and the Bloomberg U.S. Aggregate Bond Index (“Agg”) both fell and there was much talk of the demise of the “60/40” portfolio (a portfolio of 60% stocks and 40% bonds). But the S&P 500 and the Agg were not only both higher in January, they were both in the top 10% of all monthly returns going back to 1980.

The S&P 500 finished January 6.3% higher on a total return basis. That’s the third time in the last four months it was up more than 5%. (Granted, December 2022 was down more than 5%.) A clu