The adjusted close for the SP 500 on January 3, 2023 was 3,824.14. The adjusted close on February 17, 2023 was 4,079.09, representing a gain of approximately 6.67%. What accounts for this? In my opinion, mainly FOMO. Noticeable realities that mark a recession are already being seen, including layoffs across multiple sectors. The news will get worse before it gets better. I continue to think the SP 500 ends flat to up to 2% in 2023. If so, it will end somewhere around 3,825 to 3,901. If it ends in a number starting with a 4, my prediction is that it ends 2023 below 4,100.

The main issue for an individual investor is whether to put (or keep) money in equities or short term, or ultra short term, bond fund products which are yielding 4.5% to 5% as of this writing. The news from the Fed does not suggest that rates are returning to where they were pre-COVID. Perhaps they are also not returning to where they were in the early 80s (let’s hope). But it certainly does seem that the Federal Funds rate will not be dropping precipitously anytime soon. If the Funds rate remains between 3.5 and 5% for the foreseeable future, it makes holding relatively risk free ultra short term fixed income products attractive.

This is not a reason to jettison any exposure to the U.S. equities market either through the SP 500 or the total market. It may be a reason to lower exposure to the 50% range, however. And to the extent growth opportunities are one’s primary objective, to explore quality, low cost actively managed funds which have long-tenured managers and historically strong returns for at least 50 years.