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We kicked off 2023 on a positive note. After the whirlwind of 2022 (read our recap of the winners and losers), we hit the ground running this year: positive economic data, a stock market rally, and a smaller-than-last year rate hike from the Federal Reserve.

Let’s dive into the details. (You can also read complementary analysis from the team at Sanctuary Wealth.)

Economic data and policy

Inflation is still here, but it’s slowing. Prices in January were up 6.5% from last year—the smallest jump since fall of 2021. So, while inflation is still here, the numbers are moving in the right direction, showing Fed’s monetary policy may be kicking in.

Speaking of: The Fed hiked rates by 0.25% in January, a much smaller jump than its previous rate hikes. The previous six rate hikes were either 0.50% (May and December, 2022) or 0.75% (June, July, September, and November, 2022).

The pace and timing of future rate decisions may depend on the jobs market, as the Fed is mandated to watch employment as well as inflation.

While the economy did add jobs in January, the 517,000 reported by the Labor Department fell short of predictions. Still, the overall unemployment rate is lowest it’s been since 1969—3.4%.


The S&P 500® closed higher in January, up 6.18%. While the positive economic data may have boosted the stock market, it’s also fairly common for stocks to rebound in the January following a down year. In fact, investors and analysts have a name for the phenomenon: The January Effect.

One positive sign? Consumer discretionary stocks rose in January. Frequently, when consumers are worried about a recession or the economy, they spend less on “nice to have” discretionary items, causing consumer discretionary stocks to fall. We didn’t see that in January.


Bond yields fell slightly in January, from 3.88% on the benchmark 10-year treasury in December to 3.5%.  Of course, as yields fall, prices rise. You’ll see that reflected in any total return fund, as they take both price and yield into account. The Bloomberg U.S. Aggregate Bond Index—a benchmark for total return funds—returned 3.08% in January.

Both stocks and bonds posted positive returns in January, showing the relationship between them continues to evolve, as we discussed in our 2022 wrap-up.

Alternative investments and portfolio management

Because stocks and bonds seem to be somewhat correlated at present, it’s important to consider how other assets are performing when seeking to build a diverse portfolio.

Crude oil prices are well below $100 a barrel and look to be trending lower, per their 50-day moving average. Similarly, egg prices are almost back to normal as producers recover from the Avian flu that caused a shortage, and price surge, in December 2022.

When it comes to real estate, the gap between 10-year treasury yields and the rate on a 30-year fixed rate mortgage is currently greater than 3%. Normally, that gap is much smaller—less than 2%. This means mortgages may feel more expensive now, relative to the overall market, which could impact the housing market and real estate investments.

While it’s still early in 2023, there are plenty of reasons to be both optimistic and cautious. We’ll continue monitoring the market and overall economy so you can ignore the headlines and stay focused on your goals.