Transcript:
Since February, we've seen some hotter economic data points hit the marketplace. So we started the year where expectations, I guess were that the Fed was going to, you know, not get the Fed funds rate up over 5%, maybe be cutting by the end of the year. The economic data that we've seen in the last month has actually been a little hotter. So we've seen better information on the services side of the economy, and also a quite strong labor market number at the start of the month. And that's really twisted what we've seen happen in the overall market expectations. And that's really been the story of the year so far.
The stock market's been pretty much the flip of what we saw in 2022. In 2022, we saw a lot of the largest growth stocks, more speculative stocks, profitless tech stocks, all did very poorly as interest rates rose. So far this year, we've seen interest rates fall a little bit, initially, then and then recover. But along with that, we've seen a lot of the higher risk more speculative stocks actually performed very well. While some of the more areas that did very well in 2022, like energy utilities, staples, have done quite poorly. So there's a much more speculative element to what we've been seeing a lot of the most shorted stocks have been doing well. So there's a lot of fingerprints of all the equity market has jumped out to a good start this year, that it's not altogether the most trusted rally that we could call for.
It's not just been stocks I've involved with so far this year, you know, we started saw interest rates fall quite sharply in January, and then those bond yields start to increase as well. So both both major asset classes have kind of fluctuated both positive returns to start the year. Now, we've seen a little bit more pullback here in February.
One thing that we've been watching a lot of interest so far this year is what's been happening with oil. So we've had China reopen, it's a it's a big story that's been happening so far this year, the expectations, obviously, oil demand would be increasing. So far, we have not really seen that oil prices have actually declined by over 8%. This year, again, a bit of a non ratification again of that equity market rally, and that if we are going to be seeing a county that starts to become more hot, if China is really taking off, you'd anticipate that oil will start to become a more positively experienced asset class. We haven't seen that so far to date. So that's telling us, you know, again, same way with those speculative stocks that have really kind of taken over the market this year that, you know, we would expect that oil would be doing better in this environment. And certainly we anticipate throughout the year that more than likely will, as the oncoming demand from China kind of overtakes maybe slowly demand here in the US.
Valuations in the marketplace stock. Certainly last year, the whole story was really that the multiple decline. So we had multiple contraction last year, we started with a PE, and at the end of 21, that was around 22 times went down to about 16 times, but we've seen a rewriting higher, really since the end of 2022. So although we're still seeing an uncertain economic environment, you are seeing, you know, overall stock valuations that are maybe not reflective of kind of that economic uncertainty that we're seeing. And the same is true on the fixed income side. So in the higher risk areas, corporate bonds, high yield bonds, we're not seeing spreads, that would be showing any signs of stress out there in the marketplace.
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So when we're looking across the economy, right now, we're seeing a lot of uncertainty, again, uncertainty in terms of what the economic growth is looking like a lot of companies in their earnings reports aren't offering a lot in the way of guidance. So uncertainty is very, very high, not just here in the US, but obviously, across the globe in terms of what's going on with the war in Ukraine, what's going on in China. So there's a high high level of economic uncertainty market uncertainty that's out there right now. And then when you couple that with what we're seeing from a valuation standpoint, equities, and credit spreads, maybe not necessarily respecting the amount of uncertainty out there to us that just spells that this is a point in time, we're still going to want to be cautious, and really focus again on quality businesses, quality asset allocation decisions, and really kind of be guarded for what we still think is going to be more volatile markets as we kind of grind through what's going to happen with inflation. Where's the economy headed, and certainly could be a lot of bumps along the way as we continue to march through 2023.