The Federal Reserve (Fed) has raised short-term interest rates at the most aggressive pace since the 1980s in an effort to bring down the highest inflationary pressures in more than 40 years. Certainly, the main motivation behind these aggressive rate hikes is to realign the supply/demand imbalances that create inflationary pressures. But, the Fed is also trying to ensure that inflation expectations don’t become problematic as well. Inflation expectations are simply the rate at which consumers and/or businesses expect prices to rise in the future. They matter because actual inflation depends, in part, on what consumers expect it to be. If

First quarter earnings season kicks off this week with some big banks reporting toward the end of the week. In some ways this quarter’s earnings season will probably be déjà vu all over again—earnings declines and cautious guidance, reductions in estimates, but better than feared. However, tightened financial conditions in the wake of last month’s banking turmoil and building evidence for a slowing economy has changed the economic backdrop this quarter. It will be interesting to see how management teams react to these latest developments.

Setting The Stage

Corporate America faces some of the

An eventful first quarter wrapped up last week. In today’s blog, we make seven market observations from first quarter performance and share our thoughts on what these performance trends could mean for our outlook.

• Growth Dominated Value

Growth soundly beat value on technology’s strength, with an additional boost from consumer discretionary outperformance and financials underperformance (based on the Russell 1000 style indexes). Lower interest rates and lower inflation supported the growth style. LPL Research has reduced its value tilt and now recommends a roughly balanced approach to style.

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Overview

• Manufacturing activity last month fell to its lowest since May 2020, as recession fears loom in front of businesses and consumers alike.

• Employment shrunk for the second month as firms cut workers in response to weaker demand. The decline in jobs is a harbinger of a weaker job market in the months ahead.

• Prices paid by factories declined in March and align with the latest reading from the Federal Reserve’s (Fed) preferred inflation gauge released last week.

• Bottom Line: The main takeaway from this report is the job market is slowing so investors should prepare for a weaker job market, hig