The Markets

Perhaps we should call this a pushmi-pullyu market.

The first quarter of 2023 brought Dr. Dolittle’s pushmi-pullyu – the rarest animal of all – to mind. It is the offspring of goat-antelopes and unicorns, and has a head at each end of its body. The pushmi-pullyu’s unusual anatomy allows it to easily and rapidly change direction, making it difficult to catch.

So far this year, the direction of the economy and financial markets has been elusive, too.

Is inflation headed in the right direction? Inflation changed course late in 2022. The monthly change in the rate of inflation, as measured by the PCE Core Price Index (one of the Federal Reserve’s preferred inflation gauges) accelerated late in 2022 and continued to move higher in January 2023. Then, it slowed in February, creating uncertainty about the state of inflation.

The latest University of Michigan Consumer Sentiment Survey indicated that Americans expect inflation to fall over the coming year and over the longer term. That’s important because there is a psychological aspect to inflation. When people expect inflation to rise, they spend more, which can push inflation higher.

If inflation is trending lower, then it gives weight to the opinion of investors who are optimistic the Fed will reverse course this year.

Will rate hikes continue or pause? Amid persistent inflation, the Federal Reserve delivered the message that rates might go higher than expected and stay there longer than expected. Then three banks failed, and speculation that the Fed would slow the pace of rate increases began. “The challenge for the Fed is figuring out how to buttress banks and cool inflation at the same time, without triggering a recession,” reported Megan Cassella of Barron’s.

The Fed raised rates in March, despite turmoil in the banking sector. Treasury yields fell across much of the yield curve following the rate hike. Yields moved higher last week, which suggests that bond investors may anticipate further rate hikes.

While many investors appear to be optimistic that the Fed will take a breather on rate hikes, Fed projections suggest it will continue to raise rates in 2023, although it may ease in 2024.

Are we headed for a recession? It’s a question that economists and analysts have been trying to answer for more than a year as central banks in the U.S., Europe, and elsewhere raised rates aggressively. Last week, Bloomberg’s survey of economists found the probability of a recession over the next 12 months was 65 percent, up from 60 percent in February.

“After the Fed last week raised rates a quarter percentage point to the highest since 2007, economists worry not only about the impact on demand but the effect on the banking system…Financial institutions risk becoming more guarded in their lending approach, restricting access to capital needed by businesses to expand and consumers to buy homes, cars and other big-ticket items,” reported Augusta Saraiva and Kyungjin Yoo of Bloomberg.

While the odds of recession crept higher last week, not everyone agrees that a recession is ahead.

Is the economy weakening or strengthening? We’ve seen strong jobs growth, yet the unemployment rate has risen as labor force participation increased. In addition, business activity was up sharply in March 2023.

“U.S. companies signaled a renewed expansion in business activity in March…Output grew at a solid pace that was the fastest since May 2022 as demand conditions improved and new order growth returned. Manufacturers and service providers alike registered upturns in output, with service sector firms driving the increase,” reported the S&P Global Flash US Composite PMI™ report.

The economic tea leaves have not provided a definitive answer about the strength and direction of the economy. 

Despite all of the uncertainty, stock investors were optimistic last week, and major U.S. stock indices rose, reported Nicholas Jasinski of Barron’s. The Treasury market headed in the other direction as rates across most maturities of Treasuries rose and bond prices fell.

In a pushmi-pullyu market, it’s important to stay focused on your long-term financial goals. Basic principles of investing such as asset allocation, diversification and portfolio rebalancing remain sound. If you are feeling unsettled by market volatility, get in touch. We can review your goals and allocations to make sure they’re aligned.

Data as of 3/31/231-WeekY-T-D1-Year3-Year5-Year10-Year
Standard & Poor’s 500 Index3.5%7.0%-9.3%16.7%9.7%10.2%
Dow Jones Global ex-U.S. Index3.25.8-8.29.4-0.11.9
10-year Treasury Note (yield only)3.5N/A2.
Gold (per ounce)-
Bloomberg Commodity Index2.4-6.5-

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance; MarketWatch;; U.S. Treasury; London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.


Tax Day is almost here – it’s April 18 this year. If you’re retired or planning for retirement, it’s important to know that some states are more tax-friendly for retirees than others. Typically, in tax-friendly states, Social Security benefits are exempt from state tax and pension payments and/or IRA withdrawals may receive more favorable state tax treatment, reported David Muhlbaum and Rocky Mengle of Kiplinger.

“Our results are based on the estimated state and local tax burden in each state for two hypothetical retired couples with a mixture of income from wages, Social Security, traditional IRAs, Roth IRAs, private pensions, 401(k) plans, interest, dividends, and capital gains. One couple had $50,000 in total income and a $250,000 home, while the other had $100,000 in income and a $350,000 home.”

The most tax-friendly states were:

  1. Delaware
  2. Hawaii
  3. Colorado
  4. Wyoming
  5. Nevada

The least tax-friendly were:

  1. New Jersey
  2. Illinois
  3. Kansas
  4. Vermont
  5. Connecticut

When you’re deciding where to settle in retirement, there’s a lot more to consider than taxes. Family, friends, cost of living and weather also are key considerations. Weather is becoming more important as  the number and intensity of natural disasters has been increasing, raising the cost of insurance significantly in some places, reported Kate Dore of CNBC.

Weekly Focus – Think About It

“Il n’est pas certain que tout soit incertain.” (It is not certain that everything is uncertain.)

—Blaise Pascal, mathematician and philosopher

Your Team at Wellspring Wealth

David GloverMark WinstonDennis WrightAndrew WrightValeri BishopDan O’Rourke

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