Ingrams July 2023

There are hints that the Fed’s strategy to brake inflation can produce a soft landing. Investors, though, are well-advised to remain buckled in. Not Out of the Woods Yet

by Dennis Boone

As far back as a year ago, Kieffer said, “The market was pricing in a recession in the back half of ’23 … today, it looks like that is being can celed. That’s not our base case, but that’s the stock market’s signal.” Given where investors were at mid-point 2022, it’s hard to imagine how we got here from there. The na

Not so very long ago, the captains of the wealth-management industry were calling for all aboard to batten down the hatches for rough seas ahead. A year later? Well, they’re not sug gesting it’s time to gather for daiqui ris on the sun deck at 5, but they are breathing far easier—as are a good many investors. At the midpoint of 2023, it seems, most of the scowls over investment returns adorn the faces of those who tried to time the markets ahead of a recession that still hasn’t arrived. If they did, they missed out on some serious but welcome develop ments: n On the equities front, stocks have yielded six-month returns in the range of 14-17 percent. n Yields on bonds are up 2 percen- tage points. n Even cash, a dangerous po sition to maintain when inflation topped an annual rate of 9 percent last year, looks less threatening. n To top it off, a significant amo unt of investor cash is still sitting on the sidelines earning in the neighbor- hood of 5 percent. It is poised, wealth

advisers say, to move into more lucra tive uses at the first strong, sustained signals that the Fed may have indeed orchestrated a soft landing for the economy. “If you had told me that the Fed was going to raise the front end of the curve 350 basis points and long rates would drop by 100 ba

“If you had told me that the Fed was going to raise the front end of the curve 350 basis points and long rates would drop by 100 basis points, I would not have guessed that the S&P would be up 17 percent and NASDAQ up 30 percent.” — Dan Kieffer, UMB Bank

sis points, I would not have guessed that the S&P would be up 17 percent and NASDAQ up 30 percent” as of mid-July, said Dan Kieffer, director of asset allocation for UMB Bank. “Despite the aggressive rate increas es, the Citi surprise index is in a very positive trend; financial conditions are trending positive and above zero.”

tion was still waiting for the delayed impact of the Fed’s first 75-basis- point moves after that June; energy prices threatened to spike from Ju ly’s high of over $90 a barrel on the expectation of a tough winter in Eu rope and disruption from Russians’ Ukrainian escapades, stocks were off 20 percent for the year, bonds were

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July 2023

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