It’s February – What Are You Expecting?

February 19, 2023  |  Michael Reilly

Market participants just can’t get enough of the reasons why markets are doing whatever it is they’re doing right now. 

The current narrative is all about CPI data…

It’s guessing if the Fed will raise rates by 25 basis points or 50 bps… 

Or it’s all the talk about a hard landing, soft landing, or no landing at all. 

But let me give you a simpler alternative to all the narratives…

It’s February. And February is notorious for underwhelming performance. It’s just what it is. 

This year is no different.

Take a look at this seasonality chart that tracks the monthly performance of the S&P 500 Index all the way back to 1950.

There are two months that are historically weak. And guess what? February is one of them! 

So maybe it’s not the Fed. Maybe it’s not inflation, housing, or employment data. 

Maybe, just maybe, it’s something else entirely. 

Maybe this is nothing more than classic February market behavior. 

Investors should expect volatility in February. And markets sometimes need to consolidate after big moves.

Equity markets hit the ground running in January posting sizable gains year-to-date.

We’re only 35 trading days into the new year and the Russel and the Nasdaq have jumped to double-digit returns, while the large-cap S&P has gained over 6%. 

It’s not unusual for markets to take a breather after big moves. 

It’s normal. It’s healthy. It’s like a runner catching their breath before running that next sprint.

But there’s a silver lining – this is a pre-election year. And pre-election year Februarys historically hold up better than non-pre-election year Februarys.

Equity markets in the pre-election year Februarys actually have posted positive returns. This chart illustrates all February market returns vs. those that fall in a pre-election year.

And February 2023 is currently following the pre-election February pattern – positive returns.

So there you have it. Not as exciting as some of the headlines, and I’m sorry if my analysis isn’t very spicy, but I promise if you stop allowing yourself to get caught up in all the gossip and chatter, investing will get so much simpler.

If you’d like to talk more about Avalon can help you navigate the markets with ease, schedule a free 1-hour consultation with one of their advisors right now.

Until next week…

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