On April 20, the most powerful rocket ever built experienced a "rapid unscheduled disassembly" four minutes after lift-off. That’s the euphemism preferred by Elon Musk’s Space X to describe their Starship being consumed by an orange and white fireball.
​
Rockets weren’t the only thing barreling toward a blowup in April. On the 11th, Bloomberg said this about the market: “Cracks in 2023’s equity advance are appearing, as hedge funds and other speculators amass the deepest short position since November 2011 when the US sovereign credit rating was cut.” 

It started with an arguably dumb decision at Silicon Valley Bank. Put an unholy amount of long-duration bonds into the portfolio at the most inopportune time – just prior to the Fed’s interest rate thrill ride. Rates go up, value of bonds plummet. To meet the demands for routine withdrawals, sell bonds at a big loss.

No problem. Announce the raising of $2.25 billion in public and private offerings to shore up balance sheet. But that idea didn’t sit well with a few depositors, and they withdrew their money and then, of course, tweeted about it.
​
Big problem. The ensuing run on the bank brought it to its knees overnight. 

​If we were off to the races in January, February put the brakes to that. In this topsy-turvy market, nothing sucks the life out of a rally quite like good economic news. And we got some. 

The Good News

• Consumer spending surged 1.8% in January from the previous month, with retail sales showing the biggest increase in nearly two years. And consumer spending drives the economy, so that’s good. Right? 

There’s no sugarcoating this. It’s been a rough year for investors, the worst since the financial crises of 2008. Inflation has ravaged, rates have surged, stocks have plunged.

​As I write, the S&P 500 has shed nearly 20% and the Nasdaq is down 33%, with both indexes falling into a bear market. Apple, the most successful company of the 21st century, slid to a 52-week low on Wednesday, a 30% drop from the highs this year. Amazon is down 50% YTD. Meta down 64%. And don’t even get me started on Tesla.

For someone who fixates on the market, it’s been a frustrating and humbling experience. Among the many lessons learned in 2022, here are four that stick out. 

​It’s been a whipsaw November. Early on the Federal Reserve delivered a fourth consecutive 75-basis-point interest rate hike, sinking the markets. Then on November 10, the Consumer Price Index showed the rate of annual price gains slipping to 7.7% in October, down from 8.2% the previous month.

​And the crowds roared. 

The CPI report gave investors hope that inflation is now past its peak, lending confidence that the Fed’s interest rate hikes are slowly working to tame high price increases. A slowing inflation rate doesn’t portend a Fed pivot, but it does give the U.S. central bank license to take their foot off the throttle.

David Alan Carter

After the U.S. economy shrank in the most recent back-to-back quarters (by some measures, the very definition of a recession), new data in October showed the GDP grew in the third quarter by 2.6% from a year earlier. That was certainly welcome news, as was the shrinking trade deficit and a job market that remains strong.
​
While we’re on the topic of good news, consumers expect the inflation rate a year from now to be 5.4%, the lowest number in a year and a decline from 5.75% in August, according to the latest New York Fed Survey of Consumer Expectations. 

David Alan Carter

​The month started out swimmingly. The first few days in September saw a promising upswing with the S&P 500 posting a gain of a few percentage points by the 12th. Perhaps investors were giddy with gas prices falling at the pump and demand for real estate beginning to taper.

Inflation licked? Not quite.

One day later, a hotter-than-expected report on inflation sent the stock market reeling. The Dow lost more than 1,250 points and the S&P 500 sank 4.3%. Bond prices also tumbled, sending yields sharply higher.

David Alan Carter

​The markets had been on a tear. Driven by modestly positive inflation data that spurred hopes the Federal Reserve would take a less aggressive approach to future rate hikes, the tech-heavy Nasdaq Composite rallied a whopping 20% between mid-June and mid-August.

Of course, it was still on the wrong side of its 200-day moving average, and would need to climb another 17% just to break even with the high it made in late November 2021. But it was a heck of a summer rally just the same.

The operative word is “was.”

David Alan Carter

​We all know the duck test. There are variations, but it typically goes something like this: If it walks like a duck, quacks like a duck, and swims like a duck, then it’s probably a duck.

So, if it walks like a recession, quacks like a recession, etc., is it a recession? Well maybe, maybe not.