U.S. stocks rose slightly last week but it was enough for the announcement that the bear market for the S&P 500 has officially ended. The recent bear market technically ended on October 13, 2022 as the S&P 500 is now up over 20% from that low point. It was the longest bear market for the broad-based index since the 1940’s and now ushers in the beginning of a new bull market.
This rally has something in common with the late comedian Rodney Dangerfield: It gets no respect. That may be due to the fact that eight mega-cap stocks have accounted for the majority of the gains. Nvidia, Apple, Microsoft, Amazon, Meta (Facebook), Alphabet (Google), Tesla, and Netflix. It’s not surprising that the majority of these corporations have strong balance sheets and generate significant cash flow. This turns our attention to what analysts now expect for the remainder of 2023.
The chart below from FactSet shows analysts expect earnings to drop 6.4% in the second quarter but start to rebound in the third. By the time the final three months of the year come around, corporate earnings are expected to rise a strong 8.2%. Currently, investors are waiting to see if the Fed will hit the pause button when they meet on June 13-14.
It’s hard to believe 2023 is almost half-way over. Soon, we’ll be getting second quarter earnings data. We’ll keep an eye on just how much they do pull back and what we might expect for the remainder of the year.
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The Markets and Economy
- The stunning success of Apple’s App Store can only be measured in dollars and cents. The app for the latest and greatest apps now generates $1.1 trillion in annual billings and sales on a global basis. That makes the App Store larger than GDP of Saudi Arabia, Turkey, Switzerland and Taiwan.
- First it was due to Covid lockdowns that affected retailers and manufacturers creating supply-chain issues. Now, a labor dispute at west coast ports is threatening to do the same. Negotiations have been ongoing for a year. If both sides can’t come to an agreement, they may call on the Biden administration to intervene.
- Commodity prices are falling. From industrial metals and agriculture to oil and gas, many prices are the lowest they’ve been in a couple of years. Growth in most economies is being fueled by a strong service sector. With energy prices this low, inflation will continue to come down and help make the Fed’s job a little easier.
- Building development remains strong as sales of construction excavators in North America rose 23% last year over the previous year. That was the second-straight year of record sales.
- The eurozone slipped into a recession as Germany, its largest economy, posted a decline. The U.S. economy has been able to shrug off higher interest rates, but the war in Ukraine has hit the eurozone with a double-whammy of higher energy and food prices.
- Despite the eurozone’s challenges, the World Bank sees better economic growth in 2023. The increased projections for growth are due to a strong U.S. economy and China’s faster-than-expected reopening after the Covid lockdown.
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The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Consult your financial professional before making any investment decision. You cannot invest directly in an index. Past performance does not guarantee future results.
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Note: All figures exclude reinvested dividends (if any). Sources: Bloomberg, Dorsey Wright & Associates, Inc. and The Wall Street Journal. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
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