Treasuries are in a tricky spot here. Powell may be overly hawkish, but he’s been very consistent in his messaging. And it’s not wise to fight the Fed. The bond market still isn’t buying it though. Who’s right and does it help to break the market? The junk bond market really isn’t giving any warning signs right now. Emerging markets present a really interesting risk/reward trade.

Equity investors still seem convinced that the economy can still navigate a relatively soft landing despite a lot of data suggesting otherwise. Defensive equities are rotating from leadership to neutral positioning over the last few weeks as cyclicals start taking control. The bond market has been a tale of two halves of the yield curve - the short end responding to a stubborn Fed and the long end reacting to recession risk.

Industrials stocks wrapped up the 2nd half of 2022 as one of the market’s best performing sectors. Banks could end up being an attractive underdog pick for the coming year. The performance of energy stocks relative to the S&P 500 has correlated pretty highly to crude oil prices over the past year.