The opening quarter of 2023 was bifurcated. January was optimistic. That melted away due to the banking crisis and distress in the system. Energy declining escalated the trouble as Technology rebounded from 2022 vigorously. The banks mounted an anxious pall over investor sentiment. March ended with a positive note. The market action shifted markedly, reversing major losses from last year.
The month end market move was encouraging, once again driven by Technology names. Nvidia is up 90% YTD, Meta is up 76% and Tesla is up over 68% YTD. The NASDAQ leaders for the month were Intel, Advanced Micro Devices and Meta. The DOW laggards were JPMorgan Chase, Travelers, and Goldman Sachs.
Higher rates are doing the Feds job in getting inflation down. Unfortunately, it helped to fuel the Silicon Valley Bank fiasco, coupled with terrible management. As well, regulators had known there were risks with the bank and demonstrated limited follow through. This helped to pull down prices of Financial stocks indiscriminately. KBE, the S&P Regional Bank ETF, is down 17.89% YTD.
S&P500: Mar +4.22%, YTD +7.77% DOW: Mar +2.46%, YTD +0.94%
NASDAQ: Mar +16.12%, YTD +27.09% Russell 2000: Mar -4.40%, YTD +2.97%
The averages distort market results. The S&P500, the widely accepted market barometer, reflects 20 companies garnering $2 Trillion in performance. The balance of stocks in the index have posted roughly $200 Billion.
Sector Performance YTD:
Communication Services +20.2% Consumer Discretionary +15.8%
Consumer Staples +0.2% Energy -5.6%
Financials -6.0% Healthcare -4.7%
Industrials +3.0% Materials +3.8%
Real Estate +1.0% Technology +21.5%
Utilities -4.0%
The Federal Reserve hiked the lending rate by 25-basis points in March, as expected by the street. Many presume that may be the last raise, which has helped fuel the current market rally. There could be another 25-basis points hike, but clearly the end is near. The impact of the Fed’s previous moves will stick and continue to work through the economy.
April is, typically, one of the best months for positive market performance. The Large-Cap Index has returned to life. Apple, Microsoft and even Amazon have rallied. Optimism is developing. However, with this split market and the uneasiness with still high inflation, the month could be negatively impacted.
Wrapping up 2022 earnings, the year ended down 4.6% on a 5% increase in sales. Close to 70% of reporting companies exceeded estimates. Estimated results for 2023 have come down roughly 10%. The current rally in stock prices, although mixed, is at odds with this outlook.
Ed Hyman, a leading street market analyst, has been promoting a modest second half of 2023 recession. Assuming that development, volatility and shifting stock prices will prevail. Knowing that the stock market projects future results, we remain optimistic for year-end performance.
GN&Co