McCarthy/FED Headwinds

As we watch the slow unfolding of the 2023 economy unfold, here is what I see:

1. There seems to be plenty of money to keep things out of a recession.
2. The roll down of the FED balance sheet has been disrupted by the small bank crisis.
3. It would appear that we did see a media induced min-recession in late Feb-early March. Slower than anticipated Q1 GDP and poor March consumer sentiment numbers back up this view.
4. CEO’s have bought the recession story, confirmed by light inventory numbers today.
5. March durable goods numbers out yesterday gives a sign that things could be turning towards improvement.
6. Infrastructure related sector and stocks like CAT, Deere, materials, are under pressure as the Republican Budget threatens Biden’s Make America Better program.
7. The FED realizes that worker wages are not going down and hiring is actually going to increase, so they will continue to push FED Funds rate higher.
8. Market rates continue to ignore the FED rate, they did bottom in March with the bank crisis, but they are not going to 6 %. 4% would appear to be a stable working rate.
9. The negative hold that FOX had on America, peaked on January 6, 2021, market is only now realizing that the change is real.
10. We don’t have an all clear on the market at this point, this will be a grassroots bull market in my view. The current NASDAQ strength reflects the TECH roots for the Bull Market. The Big Signals will come in two steps with the Russell 2000 index. The first step signal will occur with a trade above the April 3, 2023 high of 1812 and the second step signal above the Feb 2, 2023 high of 2007.
11. I continue to focus on the Climate Tech Model for core investment stocks.
12. The fact that this RUT/NDQ relationship chart is still sitting down around the Sep 2020 lows tells me that the grassroots bull move is yet to be triggered. Current tech stock strength is good as a core building block, but we still need to see the RUT take off to show the recession fears are behind us.