April 2023 in Review

by Daniel Zeigler, CFP®, CMFC®, Senior Portfolio Manager

Welcome to the monthly market update from Midland Wealth Management. I am Dan Zeigler, Senior Portfolio Manager. Today I just wanted to spend a few minutes to give you an update on the markets for the month of April.

The good news is stocks extended their gains for the year as stronger-than-expected corporate earnings helped drive the indexes to recent highs. The S&P 500 gained 1.56% in April and is now up about 9.16% for the year. A small grouping of mega-cap stocks are behind most of this year’s rally in the S&P 500 as the chatbot-themed Artificial Intelligence investments have added $1.4 trillion in stock market value this year. The S&P 500 continues to be moving in a broad range this year, as the index continues to trade in a range of about 3800 to 4200.

Last week’s release of the latest U.S. GDP for the 1st quarter of 2023 did confirm that the economy is slowing, with GDP at about 1.1% for the 1st quarter compared to 2.6% in the prior quarter. The overall GDP news was mixed: consumers continue to show resiliency with household spending increasing at a rate of 3.7%, which is well above the average of 1.7% over the prior four quarters. However, detracting from GDP was business investment declining and a sharp drag from inventories, as well.

Overall, corporate earnings have been better than expected this quarter with about 50% of companies reporting actual results, 79% of companies have reported a positive earnings surprise, and 74% of companies have reported a positive revenue surprise. Overall, earnings have declined by about 3.7% compared to the previous year, however, the estimated earnings decline was expected to be -6.7%. It is certainly positive that the blended growth rate for the S&P 500 earnings has improved this year, but the earnings recession remains intact as profit margins are still under pressure. Over 20% of the S&P 500 is slated to report earnings this week, with Apple reporting their earnings on Thursday.

Some of the concerns about the banking sector reemerged in the last week of April, as First Republic announced they lost over $100 billion in deposits after the Silicon Valley Bank collapse back in March. However, investor confidence increased after the news on Monday that JPMorgan Chase will be buying most of First Republic’s assets, which is now the 2nd largest bank failure in the U.S.

All eyes will be on the Fed later this week as they will conclude their two-day meeting on Wednesday. Currently, the market is pricing in a high probability of another 25-basis point increase. Investors will be looking for any signs that the Fed may pause going forward as there is only a 24% probability of another rate hike in June.

We will be constantly monitoring all the economic earnings releases, Fed interest rate decision, banking confidence, debt ceiling debate, and the upcoming jobs number this Friday, which economists are expecting to see 180,000 jobs created. As always, thanks for joining me for this market update and if you have any questions, please do not hesitate to give us a call.