Market Commentary — February 21, 2023

The major indexes ended the week mixed heading into the 3-day Presidents’ Day holiday weekend. While there are signs of healthy economic growth and earnings are coming in better than expected, inflation trends took an unfavorable one-month turn.

Last Tuesday, the CPI results reported that consumer prices rose 0.5% in January, up 6.4% on a year-over-year basis which was higher than estimates but still the slowest pace since October 2021. Annual core inflation (less food and energy costs) was 5.6%, also modestly above expectations but at its slowest pace since December 2021. Then on Thursday, stocks fell on the PPI numbers which also surprised the upside. The producer price index rose 0.7% in January, posting its biggest gain since June, while core producer prices rose 0.5%, the most since May. Nonetheless, producer prices still have been on a steady and steep decline since June on a year-over-year basis, falling almost half, from 11.2% to 6.0%.

Retail sales were up 3% in January, the biggest increase in 10 months and well above the consensus of 1.8%. Consumer spending remains strong!

There is growing concern that the Fed will accelerate its pace of rate hikes, with Fed presidents Loretta Mester and James Bullard out saying they may support a 50 bps increase at the next meeting in March. CME futures are now pricing in an 18% chance of a half-percent hike, and the bond market responded. But Fed Bank President Barkin said he favors a quarter-point move to give the central bank flexibility, and Fed Governor Bowman said the central bank should keep raising rates until there is much more progress on inflation.

Former Treasury Secretary Lawrence Summers and economist Mohamed El-Erian are among noted market watchers speaking out against aggressive rate hikes, warning the Fed risks damaging the economy. Here is a link to a nice cheat sheet on Hawks and Doves from ITCMarkets. It also includes ECB and Bank of England members in its analysis.

The stock market continues to rise even in the face of rising rates and inflation as it seems to be ignoring the Fed. Meanwhile, the bond market’s yield curve has not been this inverted in decades with 2-year yields sitting around 4.6%.

In ETF news, Engine No. 1 launched the Transform Supply Chain ETF (SUPP), to capitalize on the supply chain trend of reshoring. The fund invests in companies that are creating shareholder value by minimizing supply chain risks either by reshoring jobs close to point of sale, offsetting labor costs through automation or enhancing sourcing transparency among other transformations.

iShares enters the Metaverse with its IVRS ETF. MicroSectors launched two new Energy Long and Energy Short ETNs. And Simplify launched a new thematic ETF focused on Health Sciences, SURI, actively managed and subadivsed by Propel.

Attention folks based in Southern California! WE – Women in ETFs has launched a Southern California chapter! WE Southern California will be co-headed by me, Jane Edmondson, Co-Founder & CEO of EQM Indexes, and Cleo Chang, Chief Investment Solutions Officer at American Century.

To volunteer for a leadership position, switch your WE primary chapter to Southern California, or become a new member (membership is free), click here.

Enjoy Presidents’ Day and the short market week ahead!

Jane Edmondson
CEO and Co-Founder

Share this Market Commentary


EQM Indexes LLC is a woman-owned firm dedicated to creating and supporting innovative indexes that track growth industries and emerging investment themes. Co-founded by Jane Edmondson, a former Institutional Portfolio Manager with more than 25 years in the investment industry.


The information provided on this page is for illustrative purposes only and is not intended to serve as investment advice. The information provided is as of particular time and subject to change at any time without notice.

It is not possible to invest directly in an index. Exposure to an asset class represented by an index is available through investable instruments based on that index. EQM Indexes does not sponsor, endorse, sell, promote or manage any investment fund or other investment vehicle that is offered by third parties and that seeks to provide an investment return based on the performance of any index. EQM Indexes Indices makes no assurance that investment products based on the Index will accurately track index performance or provide positive investment returns. EQM Indexes is not an investment advisor, and makes no representation regarding the advisability of investing in any such investment fund or other investment vehicle. A decision to invest in any such investment fund or other investment vehicle should not be made in reliance on any of the statements set forth in this article. Prospective investors are advised to make an investment in any such fund or other vehicle only after carefully considering the risks associated with investing in such funds, as detailed in an offering memorandum or similar document that is prepared by or on behalf of the issuer of the investment fund or other vehicle. Inclusion of a security within an index is not a recommendation by EQM Indexes to buy, sell, or hold such security, nor is it considered to be investment advice.