The 2023 Theme

For me it is simply, “Economic Results will be better than Expected”.

At the moment we are kind of at a tight spot for the following reasons:

1. The FED is hell bent on destabilizing the economy by putting upward pressure on the 3 month Fed Funds rate. Their problem is that they cannot get overall rates to follow, especially the 2 and 5 year rates.
2. My guess is that they will next try to push up long rates by concentrating on rolling off longer duration paper from the Balance Sheet. That would mean we would see the 30 and 10 year rates rise against the 2 and 5 year rates. I will be watching for that kind of action, and if the 2 and 5’s rates don’t follow the long end, the stock market will be getting a signal that the FED has run out of options.
3. Earning are probably the big thing for now. The big money thinks the analysts are looking for too high of numbers. I don’t do any work with earnings but I will just say the last GDP estimate at 4.1% doesn’t show things are that bad.
4. The biggest worry for the markets this year is probably the House Republicans who are determined to break down the government and the economy and will probably have some success at creating chaos.