Category: insight
2 Min read | March 24, 2023

Market Monitor February 2023

  • Commentary
  • Market Monitor
Close-up of stock price graphs on a computer screen.


The sizzling rally in January may have gone too far and markets began to cool in February in response to signals that the economy remains too hot.


Download full commentary


Lower recession risk


The narrative around recession continues to evolve. Despite heightened probability of recession, economies continue to show resilience and unexpected pockets of strength. The soft-landing/ hard-landing narrative has been usurped by the potential for a “no-landing” scenario, the word-of-the-month for economists in February, which points to continued but anemic economic growth, a low unemployment rate and moderating inflation.


Inflationary pressures re-ignited


Globally, inflation has been cooling since it peaked in early 2022 partly due to falling energy prices, partly due to prices of durable goods as the supply chain continued to heal. However, January’s inflation data surprised to the upside in the U.S., Germany, and Japan, with pick up in spending on goods and services, including motor vehicles, food services, and accommodation.


Peak rates moved higher


With tight labour markets and stubborn inflation, the Federal Reserve has, towards the end of the month, doubled down on their hawkish rhetoric and expressed the need to raise rates further. Bond markets sold off quickly, 10-year government yield rallied from a low of 3.39% in early February to end the month at 3.92%. The expectation for peak rate in the U.S. also moved much higher, from under 5% to over 5.5% in June 2023. The market no longer expects meaningful rate cuts by the Federal Reserve in 2023. Current expectations are for rates to remain above 5% through early in 2024.


Download full commentary

We also recommend reading:

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. This material is for informational and educational purposes, and it is not intended to provide specific advice including, without limitation, investment, financial, tax or similar matters. The views expressed herein are subject to change without notice as markets change over time. Information herein is believed to be reliable, but NEI does not warrant its completeness or accuracy. Views expressed regarding a particular security, industry or market sector should not be considered an indication of trading intent of any funds managed by NEI Investments. Forward-looking statements are not guaranteed of future performance and risks and uncertainties often cause actual results to differ materially from forward-looking information or expectations. Do not place undue reliance on forward-looking information.