CAISSA’s February Perspectives
Each month, CAISSA performs an analysis of prevailing global events, assessing their potential influence on our client’s wealth plan. We are diligently having strategic discussions with our portfolio managers, ensuring that our position remains informed and aligned with current market dynamics.
Below you will find CAISSA’s perspective on these global events.
The Federal Reserve signaled that they are unlikely to cut interest rates at their March meeting, disappointing market expectations.
CAISSA View: Markets have seen a bit of volatility over the past several months as investors are trying to anticipate the timing of future rate cuts. Just as we believed the market got too pessimistic during the October sell-off, we also thought investors were getting too optimisitc, pricing in an almost certainty of March rate cuts prior to the recent FOMC meeting. We continue to take a disciplined long-term investment approach, focused on the ultimate destination of lower interest rates, and are not trying to precisely time the pace and timing of those cuts.
Softening Economic Data
Elevated interest rates continue to impact the economy, with many economic indicators showing signs of softening.
CAISSA View: Economic data remains relatively mixed, though many metrics are beginning to show a softening within the U.S. economy. We are not seeing significant deterioration, as the consumer has held up surprisingly well given the aggressive tightening from the Fed. While we have begun to see layoffs, the overall jobs reports continue to show signs of strength. As the market attempts to determine the future course of interest rates, we look to be in a “good news is bad news” situation, where economic strength will allow the Fed to keep rates higher for longer.
Red Sea Shipping Crisis
Yemen’s Iran-backed Houthi rebels have been attacking shipping vessels in the Red Sea, pushing up global shipping costs.
CAISSA View: Ocean freight shipping costs from the Far East to Europe have increased at a faster pace than they did during the early months of the COVID-19 pandemic. However, the Shanghai Containerized Freight Index has been showing signs that pressures may be easing some. Shipping often peaks ahead of the Chinese New Year, when factories in China attempt to push out stock before closing for 8 days, which may be adding to the increased shipping demand. Additionally, many have shifted towards air freight, where prices have remained relatively stable.
U.S. / Iran Standoff
Tower 22, a U.S. military base in Jordan was attacked, killing 3 American troops and injuring at least 40 others.
CAISSA View: The Biden administration has faced intense pressure to respond to the attack in Jordan, widely believed to have come from an IRGC-backed militia. Iran issued a ‘red-line’ warning that should the U.S. strike on their soil or assets abroad, they are prepared to counterattack U.S. assets in the Middle East. We are continuing to monitor this situation closely; however, at this point, the market is not showing significant concern.