How to get webpack hot module replacement (react-hot-loader) working when proxying own socket.io server

Question

I have a node express app that is using socket.io. This app is proxied through webpack's dev server as I want to use hot module replacement in the client side react app (which communicates back to the socket code on the node app.)

If I add my socket.io listener however it breaks the hot module replacement stuff. I guess because my listener is receiving the messages instead of the hmr listener?

The problem is that when I save a file that would be hot loaded, instead i get the following in chrome dev tools and NO hot load:

[WDS] App updated. Recompiling...
client?eeaa:52 [WDS] Proxy error.
client?eeaa:54 cannot proxy to http://127.0.0.1:1338 (read ECONNRESET)
client?eeaa:90 [WDS] App hot update...
socket.io.js:1456 GET http://localhost:1339/socket.io/?EIO=3&transport=polling&t=LA7JXr9&sid=r1NFzh1HOD5GcbN0AAAA 502 (Bad Gateway)
client?eeaa:25 [WDS] App updated. Recompiling...
client?eeaa:90 [WDS] App hot update...
socket.io.js:1456 POST http://localhost:1339/socket.io/?EIO=3&transport=polling&t=LA7Jckl&sid=r1NFzh1HOD5GcbN0AAAA 400 (Bad Request)

(The body of the 400 (Bad Request) is:

{"code":1,"message":"Session ID unknown"}

Anyone know how to set this up properly?

MY webpack.config.js is currently:

var path    = require('path');
var webpack = require('webpack');

module.exports = {
  entry:  [
    'webpack-dev-server/client?http://127.0.0.1:1339/',
    'webpack/hot/only-dev-server',
    './src/client/main.js'
  ],
  output: {
    path:     path.join(__dirname, 'dist'),
    filename: 'client-bundle.js'
  },
  resolve: {
    modulesDirectories: ['node_modules'],
    extensions:         ['', '.js']
  },
  module: {
    loaders: [
      {
        test:    /\.js$/,
        exclude: /node_modules/,
        loaders: ['react-hot', 'babel']
      }, {
          test: /\.css$/,
          loader: 'style!css'
      }
    ]
  },
  plugins: [
    new webpack.HotModuleReplacementPlugin(),
    new webpack.NoErrorsPlugin()
  ],
  devtool: 'inline-source-map',
  devServer: {
    hot: true,
    proxy: {
      '*': 'http://127.0.0.1:' + (process.env.PORT || 1338)
    },
    host: '127.0.0.1'
  }
};