Subscribe to our weekly newsletter below for all the market updates, current events and so much more you don’t want to miss out on in the financial world!
The S&P 500 closed the week at a level more than 20% above the lows of October ’22, meeting one definition of a “bull market.” Bull markets are historically favorable for equities and credit and coincide with a healthy environment for corporations to grow revenues and profits. Before celebrating the return of the bull, however, prudent investors may want to closely examine some common bull market economic indicators that could either confirm or reject the bull market thesis.
Market Recap: Have We Already Entered Recession and Should We Care?
The wall street aphorism that the market is not the economy has rung true so far this year. US Large Cap stocks are up almost 10% through the first five months of the year, powered higher by the high-flying tech stocks, despite signs that the ongoing unwind of fiscal and monetary stimulus is slowing growth and leading to pockets of stress in the markets.
Despite inflation reports which showed the pace of inflation continues to moderate – both as measured by the Consumer Price Index and the Producer Price Index, markets finished the week lower, weighed down by little progress towards resolving the US debt ceiling. Should congress fail to reach a debt ceiling agreement, the Brookings Institute estimates that the treasury could continue to make interest payments on government debt but would have to cut other outlays by 25%.
A very volatile week in markets saw the major indices rally on Friday to finish the week only modestly lower. The week was highlighted by the Federal Reserve decision announcement on Wednesday to hike the federal funds rates by 0.25% to 5.0-5.25%.
Strong earnings results from Meta, Microsoft and Alphabet pushed equity markets higher this week, with the tech-heavy NASDAQ leading gains. On the economic front, a drawdown in business inventories led to a weaker-than-expected estimate of US economic growth for the first quarter of the year.
Mixed corporate earnings, political negotiations over the US debt ceiling and signs of a deteriorating US labor market contributed to a mixed week in equity markets. Overseas, European markets continued to push higher, and China’s GDP estimates beat forecasts and showed continued economic acceleration as it emerges from its “Covid zero” restrictions.
A busy week for economic data which, on the whole, showed slowing economic growth and moderating inflation pressures pushed equity indices to modest gains. A busy week for economic data which, on the whole, showed slowing economic growth and moderating inflation pressures pushed equity indices to modest gains. Inflation data, highlighted by the CPI and PPI reports, came in below expectations.
March finished on a positive note, with the S&P 500 advancing 3.5% on the month and 6.4% above the March 10th lows. Easing concern about the banking sector and slowing inflation gave rise to the hope that the Fed will achieve a ‘soft landing’ – bringing inflation down towards its 2% target without pushing the economy into outright recession.
Markets were broadly higher in a week that saw continued volatility on the back of the ongoing turmoil in US (and now global) banks and a Federal Reserve that gingerly toed the line between giving in on the fight against inflation and being tone-deaf to the mounting evidence that its policies are leading to economic and market-related stress.
Major US stock indices finished the week higher amidst volatility driven by continued pressure in the banking sector as both the government and other large banking institutions took action in attempt to provide liquidity to smaller banks facing large outflows and also to shore up confidence in the banking sector as a whole.
Markets finished the week on a negative tone, as tech-focused lender Silicon Valley Bank (SVB) was shuttered by US regulators. SVB, the 16th largest bank in the U.S., ran into difficulties as withdrawal requests (a short-term liability to the bank) were backed by a portfolio of long-dated treasury and mortgage backed bonds (long-dated assets).
Markets began the month of March on a positive note, with gains in cyclically sensitive sectors such as energy, materials, and industrials more than offsetting losses in utilities and healthcare. On the economic data front, relatively strong global economic data suggested continued central bank tightening may be appropriate in light of inflation remaining above policy targets.
Markets had a tough holiday-shortened week. Stock and bond prices fell as bond yields rose, reflecting investors’ adjusted views on a Federal Reserve which may need to maintain a restrictive policy stance in light of stickier inflation and diminished signs of a severe economic downturn.
Stock markets took a pause last week, posting the biggest five-day losses since mid-December, yet remain broadly positive on the year. The decline was largely due to dampened expectations of a Fed rate cut by year-end as Fed Chair Powell reiterated the committee’s expectations that policy would likely remain tight.
Despite finishing the week on a softer note, markets continued their very strong start to the year. Despite trailing their tech counterparts in the NASDAQ, small-cap stocks (as measured by the Russell 2,000) posted their strongest start to the year since 1987.
US Markets rallied this week with all three major indices posting gains on the back of a better-than-expected Q4 ’22 GDP report and corporate earnings. On the economic data front, the initial estimate of 2022 Q4 growth was 2.9%, beating estimates and the PCE price index reported a 5% gain from December ’21 – slightly below expectations and the lowest reading since September 2021.
For our first market recap of 2023, we take a moment to both reflect on the year past and look forward to the year ahead. 2022 was a challenging year for investors; both the broad stock market and bond market finished in negative territory and a blended portfolio of 60% stocks and 40% bonds had its worst year since the 1930s.
We got more signs that the economy is softening, with the US manufacturing Purchasing Managers Index clocking in at 49. Why is 49 an important number? Anything below 50 signifies a shrinking of the manufacturing economy.