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Nyse market watch4/2/2023 ![]() In fact, we saw just this past week that unit labor cost data for the fourth quarter came in at 3.2% annualized, well above expectations for a 1.6% growth rate, further evidence that wage gains have yet to meaningfully ease. In particular, services inflation – driven by a strong labor market and higher wage gains – continues to exceed expectations and keep inflation elevated. ![]() Inflation moving lower, preferably by a cooling in services inflation: While headline inflation has been moving lower since its peak in June 2022, we have seen data more recently point to mixed outcomes, with better labor market and consumer data offset by softer manufacturing trends. Three conditions for a sustainable recovery:ġ. We highlight three potential conditions that we believe would support better market returns longer term, including: 1) inflation moving lower, 2) the Federal Reserve pausing its rate-hiking cycle, and 3) earnings revisions bottoming. While we would expect market volatility to continue near-term, we are also watching for key inflection points this year that may indicate the early innings of a more sustainable rally ahead. This latest bout of volatility in markets has been driven by a few factors, including stronger than expected labor and inflation data, as well as a re-pricing of expectations for additional Federal Reserve rate increases, which have put pressure on both stock and bond markets. Meanwhile, in the bond space, short term and long-term government bond yields have moved notably higher in recent weeks, with the 2-year Treasury yield approaching decade highs 1. ![]() ![]() Despite markets moving higher last week, the S&P 500 year-to-date returns have gone from 9.0% earlier in the year, to around 4.5% now, about a 5% correction from recent highs. Three Conditions for a Sustainable RecoveryĪfter a strong start to the year, market volatility in both stocks and bonds seems to have returned. ![]()
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