2023 has witnessed a dizzying array of consensus macroeconomic views, from no landing to soft landing to a financial banking crisis and back again. The fundamental backdrop we see for the economy is that inflation, while making some progress, continues to run well above target and the labor market remains overheated.

The anxiety among investors is understandable, given sky-high inflation, stock market losses, the war in the Ukraine, and looking mid-term elections.  However, now is not the time to panic.  One of my favorite quotes from Mark Twain is “History doesn’t repeat itself, but it often rhymes”.  And what is happening today, certainly rhymes with what we have seen in the recent past.

The US economy balances in an uncertain position entering the second quarter. In certain respects, the economy is on solid footing; the consumer is in good shape. The labor markets are tight with the unemployment rate, at 3.6%, close to historic lows. Jobs are plentiful and wages are rising. While households have burned through the COVID-stimulus cash, their savings rate continues to be elevated, currently at 6.3%, which adds a level of cushioning should the economy turn south. On the Corporate front, profits recovered quickly and are now well above pre-pandemic levels. Business investment is continuing to accelerate and, with a growing trend to bring business operations back to the US, implies US economic growth should continue.

Another quarter, another Covid variant emerges. This time Omicron, which is more infectious but less severe than previous versions of the Covid virus. While there are nagging concerns, continued vaccination (and boosting) progress has thus far mitigated any new issues that could arise with the continuing evolution of the pandemic.