Why are markets moving up to start 2023?

Kids, behold… the January Ron Swanson effect.

Nearly every corner of risky assets are up to start the year:

• The S&P 500 ($SPY) is up 3%.
• The Nasdaq ($QQQ) is up 5%.
• Bitcoin ($BTC) is up 25%.
• Chinese stocks ($PGJ) are up 13%.

There are several factors helping drive up the market:

1/ China has shifted its zero-COVID policy stance to reopen at all costs — easing fears of a global recession.

2/ The US Dollar Index ($DXY) has fallen over 10% from a high last September (compared to a basket of major currencies).

3/ Inflation is trending lower, as shown by the December CPI and PPI reports.

But a recession is still in play. Investors are hoping for a soft landing — interest rates rising without triggering a recession. Too early to say, but companies are preparing for the worst.

• Tech giants continue making significant layoffs that are already running into the hundreds of thousands.
• Analysts are expecting corporate earnings to fall this earnings season.
• Early reports from major banks show preparation for a potential recession.

Remember this equation: The stock market ≠ the economy.

We’ve said it many times, and we’ll continue pounding this into your heads. Markets are forward-looking, and current prices reflect future expectations.

While this could turn out to be a temporary bear market rally, a potential market bottom in 2023 seems like a real possibility. Locked and loaded.

The Average Joe: Investors, under our tutelage in 2023, we shall turn you from gladiators into Swansons.