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INVESTMENT STRATEGY QUARTERLY

Letter from the Chief Investment Officer

The Evolution of Markets: Scarier Than Jurassic Park?

Steven Spielberg’s sci-fi thriller Jurassic Park celebrates its 30th anniversary this year. An awe-inspiring technical
marvel, it used computer-generated imagery to bring dinosaurs back to life. Three decades later, we’re bringing
them back to life as we borrow the film’s memorable scenes—and some scientific and prehistoric concepts—to
articulate our ten investment themes for 2023.

In the film, mastermind John Hammond collaborates with scientists to construct Jurassic Park—an island popu-
lated with genetically-engineered dinosaurs. As the state-of-the-art facility nears completion, its investors fret
about the safety and viability of the park. To assuage these fears, a group of palaeontologists are recruited for a
tour. When the touted safety measures fail, the predators break free and begin to hunt the group.

What does that have to do with the economy and financial markets? Granted, these days there are plenty of con-
cerned investors. But we’re focusing on the theme of evolution instead: the ebb and flow, contraction and
expansion that breeds stronger economies and financial markets over time. These natural shifts in the investment
landscape present new situations to adapt to, but that also means there are new opportunities to discover. As we
unearth our ten themes for 2023, we’ll link each to a prehistoric or archaeological idea, but the implications are
very relevant for today—and tomorrow. It’s better to be prepared than petrified.

Months in the Making: A Mild Recession labour market conditions will stall the momentum of the economy
by midyear. But at the risk of sounding like the scientists who
Back then, they promoted Jurassic Park as “An Adventure 65 Million doubted the possibility of the dinosaurs’ escape, we believe that
Years in the Making.” It may seem like the looming recession has the contraction will be contained. That’s because the on-going
taken that long to develop, too. Economists, CEOs, consumers, and industry-specific ‘rolling recessions’ have already absorbed some
the media have been ringing the recession alarm for months. It of the downturn.
might be the most telegraphed recession in history. Our base case
is that the economy will experience a mild recession this year. But Fed ls the Predator, Inflation the Prey: But
whether U.S. GDP is slightly positive, slightly negative, or flat (our the Hunt Ends Soon
estimate is 0.0%), there will still be plenty of adventure in Invest-
ment Park. Because of aggressive tightening from the Federal Like a velociraptor clutching its prey, the Fed is grappling with infla-
Reserve (the Fed), there is already a power outage in the more sen- tion. Fed rate hikes haven’t been as swift as the predator’s sickle
sitive areas of the economy, such as housing, transportation, some claws, but the 425-basis point squeeze has been the most aggres-
retail, and even parts of tech. There are some glimmers of light: sive tightening since 1980. With the keen edge of the Fed’s policy
strong consumer fundamentals (e.g., excess savings, job openings) cutting into demand, inflation won’t be at the top of the market-risk
are acting as a buffer. Still, dwindling savings and weakening food chain for much longer. Prices for commodities, goods, and ser-

Investment Strategy Quarterly is intended to communicate current economic and capital market information along with the informed perspectives of our investment professionals.
You may contact your financial advisor to discuss the content of this publication in the context of your own unique circumstances. Published 6/1/2023. Material prepared by
Raymond James as a resource for its wealth managers.
*Financial forecasts should NOT be considered a guarantee of future performance or a guarantee of achieving overall financial objectives. Expressions of opinion are as of this
date and are subject to change. Past performance is not a guarantee or a predictor of future results.

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