It looks a lot like Deja Vu 2022…

It's finally 2023! Hello new year and good riddance to the year that was. Last year was tough for the S&P 500 (SPY) by any measure...so let's put that behind us and look to 2023 to see what's in store for us. There's a lot to come in the next few weeks, so let's get to it. Read on.

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(Please enjoy this updated version of my weekly commentary originally published on January 5, 2023 in the POWR Stocks Under $10 newsletter).

Market Commentary

You know what excites me the most? Not having to talk about the Federal Reserve every week over and over and…

…Wait, what is that?

The minutes of the Fed's December meeting were released on Wednesday?

And the market took a dive on Thursday due to the good jobs numbers due to the Fed's likely reaction (more rate hikes)?

Oh, and two Fed members made remarks at different events today?

Welcome to the new year... just like the year before.

For better or for worse, the Federal Reserve remains an important driver of the market. And we will talk about it again in this newsletter. A lot.

But to Chairman Jerome Powell's credit, the December meeting minutes make their outlook for 2023 crystal clear.

"Read my lips: NO FURTHER RATE CUTS."

Okay, that's not a direct quote from anyone, but it might as well be.

Even though many investors have already talked about a potential policy pivot in 2023, the minutes showed that no Fed official expects a rate cut at any time in the future. year.

They even included a line warning investors to keep market bounces to a minimum.

"Participants noted that, because monetary policy operates importantly through financial markets, unwarranted easing of financial conditions, particularly if driven by public misperception of the Committee's reaction function, would complicate the Committee's efforts to restore price stability.”

…..?

“In other words, if stocks continue to rally on bad economic news, the Fed will need to push for an even higher terminal rate and unofficially add ‘weaker stocks’ to the mandate,” wrote BMO Capital Markets strategists Ian Lyngen and Benjamin in a note Wednesday.

Oh.

Now, I know that may sound extremely austere - it reads a bit like the Fed has its foot on the neck of the entire stock market (SPY).

And yet, St. Louis Federal Reserve Chairman James Bullard gave a speech earlier today, saying the prospects for a soft landing are rising due to continued strength in the US stock market. work.

So, a little bad and a little good.

We will know more by the middle of the month. A number of important economic reports are expected to be released over the next two weeks. Then we have the next FOMC meeting, scheduled for the last day of January and t...