In the second quarter of 2023, U.S. stocks were the place to be invested. Investors grabbed hold of the narrative that the Federal Reserve (the “Fed”) has quelled inflation, the U.S. economy will not experience a recession or if there is a recession, it will be mild and there will be a quick and decisive pivot back to an easy money economy. Perhaps the Fed’s incredibly aggressive rate hikes have clawed back some of the credibility it lost during the “inflation is transitory” period. With risk aversion set aside, and the artificial intelligence (AI) frenzy in full swing, investors seem to be emboldened by positive signals from Gross Domestic Product (GDP), housing and jobs data even though these indicators tend to be lagging and not leading. There are potential warning signs of challenging times to come. Among them are continued hawkish language from the Fed that rates will remain high for a long time, a steeply inverted yield curve the likes of which has not been seen in 40 years, the Fed Fund’s rate now exceeding headline Consumer Price Index (CPI), and the first ever sustained period of negative money supply growth.

To view the entire article, click here.