Watch the CPK Market Action Report: February 2023

Easing inflation has investors clambering for growth stocks and pushing equity markets higher in hopes that the Fed will reverse course of higher rates in the second half of 2023. Is this a sustainable rally or just a head fake to get investors fully invested ahead of a recession-based selloff?  

Watch the Market Action Report now:

Market Action Report

February 2023



Easing inflation has investors clambering for growth stocks and pushing equity markets higher in hopes that the Fed will reverse course of higher rates in the second half of 2023. Is this a sustainable rally or just a head fake to get investors fully invested ahead of a recession-based selloff?  

That action starts, NOW!


January proved many forecasters wrong as equity markets soared higher. The major indices reversed their order of dominance from the last several months with the Nasdaq Composite easily taking over the lead by posting a gain of 9.68%. However, the S&P 500 and Dow Jones Industrials finished up nicely as well with returns of 5.8% and 2.91% respectively.


Large cap growth and tech stocks were able to catch a major bounce this month after posting some dismal returns for the last twelve months. This should not come as a surprise to regular viewers of this video. Even though I have been pounding the table about not fighting the Fed, that does not mean there can’t be pockets where the markets react inversely to the efforts of the Fed. Importantly, quick upticks like these in a slowing economy can often be head fakes that trick investors and portfolio managers into increasing their equity exposure over a fear of missing out or in an effort to make up losses and ultimately find themselves in a deep selloff shortly thereafter. I can’t emphasize this enough; it is not the time to try and be a superhero.


Bond yields fell across the board for the month with the 5 yr hitting at 3.63% and the 10yr at 3.52%. The 30 yr yield also moved lower to 3.66%. The 10’s-2’s spread closed at -70 basis points. As I write this, we are awaiting the Fed’s decision to raise rates another anticipated .25%. If the commentary from Powell indicates a dovish outlook for future hikes, expect the 10’s-2’s spread to narrow. Alternatively, you can expect a widening if you hear a more hawkish tone.


Just like last month, Crude oil recovered from a swift drop early in the month to close slightly lower at $80.45 a barrel. China’s reopening is helping improve sentiment. However, all indications from the Fed will control future moves. On the charts, the 50-day moving average will act as initial support at $77.85 while $80.50-$81.50 will offer initial resistance to the upside.

Copper was strong all month and finished up at $4.22. However, there is room for an 8%-10% correction before prices find support from Q4’22 just below $4.00. A further breakdown below $3.75 would be a more ominous anecdotal signal for the economy from the industrial metals market.

Gold also posted a strong uptick this month managing to close at 1928.40/oz. It seems the 2023 rally has at least temporarily stalled in the mid $1,900s this week but the conclusion of the Fed meeting today could change that. A dovish tone by the FOMC would ignite a continuation higher in gold while another hawkish surprise could easily see half of 2023’s roughly 6% gain be given back today.


Last month, I stated we could see a positive tailwind for risk assets if we saw the dollar decline towards 100. Well, that is exactly what happened with the Dollar closing out at $102.08, and risk assets soared. Any indication of a potential pause from the Fed on rate hikes and we will most likely see the dollar fall even further through 101. Any language to the contrary, would send the Dollar index higher through 103 (or more).


Clearly, inflation is declining. While we are seeing that pretty much everywhere, we should not expect it to be a linear process. There will be gains and some setbacks, but broadly, disinflation remains a positive for the market and certainly much better than where we were last year. That’s encouraging.


I am doubling down on my guidance from last month to be very cautious of chasing any rally. As you know, we substantially outperformed the markets last year and we are doing the same this year running neck and neck with the Nasdaq all while maintaining our 40% cash position.

I have seen 2023 S&P 500 earnings projections anywhere between $200 and $231. I tell you this because multiplying that number or one in the range by a reasonable multiple for the economic conditions we are facing would give you a good idea of where the year-end value could be for the S&P 500. A multiple of 16 would give us a range of 3200-3696, while a multiple for a stronger economic condition of say 20 would present a valuation range of 4000-4620. Considering the intentions of the Fed to continue to raise rates and potentially keep them higher for a longer period of time, it is unlikely that we are headed into a strong economic environment. This is exactly why there is a strong belief that the current rally may be a head fake ahead of a retracement to 3000 or 3500 over the next few months.

This is also why our models continue to maintain a 40% cash position. However, there will be a time to put that cash to work. That will most likely happen when the economy is not doing well, and confidence is at a low. That is generally a good time to start putting cash to work. As such, a correction to 3500 in the S&P 500 would most likely be a reasonable time to start putting cash to work.


For the month of February, the cash allocation in our equity models remains at 40% due to the model’s more aggressive nature. As I stated earlier, we finished 2022 substantially better than the indices and after just the first month of 2023, we are greatly outperforming them again this year.

Our broad focus is now on International Equities, Cash and Commodities.

In International Equities, our focus is on Europe Emerging, Latin America and Europe Developed.

As for Commodities, our focus is on Industrial Metals and Precious Metals.


As a reminder, my current allocation is not a recommendation. Regardless of what happens next, investors like you need to have a simple and yet solid financial plan that reduces RISKS, COSTS and TAXES while securing the necessary income you need to maintain your lifestyle throughout retirement.

If you don’t have a plan OR you’re not comfortable with the plan you have, call me today to get pointed in the right direction.

I’m Chad Kunc and that puts a wrap on the February 2023 Market Action Report. Thanks for joining me. It’s time for me to get back to the markets.

And that action starts, NOW!