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Market Recap – April 24, 2023

Keel Point

April 25, 2023

With no significant economic news or unexpected Fed pronouncements this past week, stock markets closed essentially flat, with the S&P 500 down 0.1% and daily Q1 earnings reports pushing stock prices up or down.

  • Year-to-date S&P stock prices are up 7.6% and up 15.5% from last October 12. Since January 3, 2022, S&P prices are still down 13.8%
  • The outlook for Q1 negative earnings growth is why many market forecasters are calling for another market decline in Q2 even though historically the relationship between an earnings recession and market pullbacks is not so clear.
  • BMO Capital Markets reports that during the 17 profit recessions since 1948 the S&P rose 5.9% on average after the second consecutive y/y earnings decline, with gains occurring 75% of the time.
  • The other key variable is the expectation that the Fed’s ¼% rate increase at its May 2-3 meetings will be its last and that its next rate move will be a rate cut. Goldman Sachs notes that since 1982, the average 12-month S&P return after a Fed rate peak is 19%.

Debt Ceiling negotiations likely won’t begin until after the House of Representatives adopts Speaker Kevin McCarthy’s plan for spending cuts in exchange for an increase in the debt ceiling that would cover spending through March 2024. Most likely a final resolution will be at the last possible moment, and the uncertainty will put additional downward pressure on the economy and financial markets.

India now has the world’s largest population, estimated at 1.43 billion according to the United Nations, and over the next 12 months it will replace China as the largest labor force. The impact on U.S. growth, trade and standards of living will be positive.

  • India has maintained its unaligned stance between the U.S. and Russia and is exploiting Russia’s need to sell oil at discounted prices. The new geo-political divide, however, is between the U.S. and China, and it is in India’s interest to align politically and economically with the U.S.
  • India already is benefitting from “friend-shoring” with U.S. supply chains shifting into India and out of China. Apple is relocating more of its manufacturing into India and tripled its iPhone production in India over the past 12 months.

Disclosure: Securities offered through Keel Point Capital, LLC, Member FINRA and SPIC. Brokerage and Investment Advisory Services are offered under the Keel Point brand. Investment Advisory Services offered by Keel Point, LLC an affiliate of Keel Point Capital, LLC. While reasonable efforts have been made to provide data from sources considered to be reliable, no guarantee of accuracy is given. Keel Point does not give tax, accounting, regulatory, or legal advice to its clients. 

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