Bond and equity volatilities at lowest levels since 2021 = supportive >20% rise in 2023. Updating "Granny shots" +12 adds (-12 deletes). 2023 YTD +39bp outperformance. 2022 +395bp outperformance. List adds attached.

___________________________________

  • Granny Shots January Quarterly rebalance today
  • see below for adds and deletes

___________________________________

Main event this week is Feb FOMC and we think Fed will continue to tolerate easing financial conditions

The most important event in the coming week is the Feb FOMC decision (2/1). We will have more comprehensive thoughts on Wednesday, but as many are aware, we expect the Fed to become increasingly tolerant of easing financial conditions. Why? Because inflation is tanking and the Fed and markets are now "course correcting" as this trajectory legs down.

As for equities, our base case for 2023 is that stocks will rise >20% and while it is early in the year, the S&P 500 is indeed tracking very closely to the historical template:

  • the rule of first 5 days was triggered with S&P 500 >1.4% in 1st 5 days
  • since 1950, this has led to a median gain of 26% (7 of 7 instances positive return)
The chart in this report is only accessible to members

And this ties back to the need for investors to shift their mindset. From the crisis of 2022 to seeing the opportunities in 2023. Again, this is not a straight line recovery, but the cadence and tempo of markets already in 2023 is far different:

recall, from Feb 2022 to Oct 2022, equities were under enormous selli...
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