2023 First Quarter Commentary: Economic Recap and Market Summary

Strong equity market performance and overall decent economic growth characterized the first quarter of 2023, save for the unexpected banking crisis that emerged in March across the U.S. and Europe. Given this recent development, the Fed’s battle to combat inflation will likely take a pause as it shifts its focus towards maintaining financial stability. However, some believe that the Fed will refrain from lowering rates to maintain its credibility, especially with inflation still far above its 2% target.

In this commentary, we dive further into the current macro backdrop and offer insight into where we believe the economy and markets may go.


  • The collapse of several large banks will force both households and businesses to reassess their consumption and borrowing, softening short-term demand.
  • Thousands of regional and community banks with less than $250 billion in assets account for nearly 50% of commercial and industrial lending and a majority of commercial real estate lending.
  • Economic data showed some improvement, but inflation remained elevated with a one-year increase of 6%. Wage growth is decelerating, which should be positive news for the Fed.
  • Home prices have experienced a 5% decline from their June 2022 peak, placing the economy firmly in the late stage of the business cycle. Further slowing of the economy is expected.
  • Bond yields retraced significantly from their 2022 highs, providing some reprieve after a dismal year. The inverted yield curve, depicting a situation in which front-end borrowing rates exceed longer-end borrowing rates, has forecasted a slowing economy for several months now.

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