February 2023 Monthly Recap
Market Snapshot
*As of 02/28/2023
Key Takeaways
  • The economy has decelerated in recent months. GDP data for Q4 was also revised down slightly to 2.7%, meaning that growth was still positive at the end of last year, but was weaker than originally believed due to slower consumer spending and exports.
  • Inflation figures for January were unexpectedly hot with PCE inflation — the measure that the Fed favors — still far above the Fed’s 2% target, stoking concerns that the central bank may need to raise rates more aggressively. They are now expected to push the fed funds rate to nearly 5.5% later this year.
  • The demand for goods skyrocketed during and after pandemic lockdowns, while services languished as consumers stayed home. Manufacturing activity has slowed – but services are still growing. Much of this is by design as the Fed attempts to slow the economy.

For February 2023, stock market volatility picked up as recent economic data have led markets to retreat after a strong start to the year. The S&P 500 declined 2.7% in the final week of February, but finished the month up 3.4% year-to-date. There has been a divergence between the Dow which is now slightly in the red, and the Nasdaq which finished the month up 8.9% on the year.

  • The economy has slowed and the differences between goods and services are driving both growth and inflation. This was widely expected with GDP anticipated to be flat in 2023, but there are always swings and uncertainty in the data.
  • Inflation can vary significantly from month-to-month too, especially as rent and housing prices stabilize due to rising rates.
  • Investors should remember that markets have regained significant ground since last Fall. Diversified portfolios are mostly in the black this year and the S&P 500 has only experienced one 5% pullback in 2023. Staying invested can be difficult amid all of the negative market headlines but it’s ultimately what allows investors to achieve their long-term goals.
Chart of the Month

Despite swings, markets have been calmer in 2023.

Sources: Clearnomics, Standard & Poors
© 2023 Clearnomics, Inc