The More Things Change, The More They Stay The Same

Last week’s markets centered around CPI and many eyes were watching the first significant Tech IPO in nearly two years, as ARM debuted. The Consumer Price Index (CPI) was an econometric star, as core CPI came in hot (up 0.3%) and headline CPI held stable at expectations (up 0.60%). Core CPI is more concerning, typically to the Fed, as it is considered ‘stickier’ inflation, because it excludes volatile food and energy prices. Wednesday also saw the MBA 30-Year mortgage rate tick back up to the recent high of 7.3%. Retail Sales reported slightly above expectations at 0.6% M/M.

Last week brought the largest IPO in nearly two years to markets, as ARM, the United Kingdom-based chip designer responsible for chip technology used in everything from iPhones to cars, debuted on the Nasdaq exchange. The shares opened at a healthy 10% premium above the offering price at $56 and closed at $63.59. Some see the successful IPO as a possible catalyst for the market allowing other private firms waiting on the sidelines to go public. The recent lack of IPOs has been attributed to the lowered company valuations caused by the high interest rate environment and recessionary fears. Waiting in the wings as potential IPOs this year are Reddit Inc. (after recent API controversy), Stripe Inc., Chime Financial, and Instacart.

Weekly Performance

This week, all eyes will be on Wednesday’s FOMC meeting. Markets are pricing in a 99% chance of a rate hike pause. This will leave the Fed Funds range at the 5.25%-5.50% band. With short-term Fed policy viewed more clearly to market participants, most attention will be focused on the subtleties of the announcement and guidance on future Fed policy. Student loans, labor actions, and consumer debt are key topics we will be looking for mention of in the release and following press conference.

It is often said that the more things change, the more they stay the same. There is no doubt that there are similarities in the various phases of the economic and market cycles, but none of them are ever exactly alike. Vigilantly looking for clues to what these new market factors will be and how much impact they will have is essential to portfolio stewardship. At the same time, however, we know that failing to be cognizant of the past can doom us to repeat it. It will certainly be nice to arrive at the day where the past is but a memory and our slates are wiped clean. “See, I will create new heavens and a new earth. The former things will not be remembered, nor will they come to mind” (Isaiah 65:17).

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