The stock market roared upward to close the last week of the quarter on a strong note. By the ring of the closing bell on Friday, the S&P 500 rose 7% for the quarter while the tech-heavy Nasdaq gained almost 17%. The Dow Jones Industrial Average was up fractionally. With everything that’s happened in the first three months of 2023, investors now ask: What’s next?

We know the stock market is entering another earnings season. Results for the first quarter of the year will begin the second week of April. We also know that historically, April is the second-best-month of the year for stocks. From 1928 to 2022, April posted a gain of 1.4% on average. That’s second to July’s average gain of 1.7%. The chart below from Standard & Poor’s shows how strong April typically is. It also shows that the next month, May, is the second worst month for stocks.

Inflation continues to ease. That’s good news for investors. But the Fed wants it to come down faster. It is said that it takes about 12 months for an interest rate increase to factor its way into the economy. We are at that juncture now. Last March, the Fed began their assault on inflation by starting with a 0.5% rate increase. As we move forward through the months of spring, we need to keep a close eye on inflation figures and see if the Fed’s previous rate increases will do the job.

Combined with the banking crisis over the last few weeks, continued easing of inflation may give the Fed a reason to pause. That, would be good news for the U.S. economy and help answer investor’s question: What’s next?

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The Markets and Economy

• According to trustees of the Social Security fund, there will not be enough money to pay recipients beginning in 2034. To secure funding, it is expected that Congress will have to raise taxes and reduce benefits. Expect a long and contested fight over this.

• The S. is becoming a nation of two housing markets. In one, prices are falling from a year ago. In the other, they’re still posting annual gains. In all of the 12 major housing markets west of Austin, TX, home prices fell in January on an annual basis. In the 37 biggest metro areas east of Colorado, home prices rose year-over-year. The divergence of geographical disparity is highly unusual if not unprecedented.

• As the war in Ukraine enters its second year, Western sanctions and a loss of able-bodied working males are taking a serious toll on the Russian The labor force has shrunk as young people are sent to the front or leave the country over fears of being drafted. Foreign investors have fled the country and its largest trading partner next door, Europe, has curtailed normal trade.

• A major ad forecaster said advertising is still expected to grow in 2023 despite mixed economic signals. The 3.4% growth rate in ad spending is welcome news say global marketing executives.

• The Conference Board’s index of leading economic indicators declined 6.5% in February, year-over. Since 1960, the index has never been down 5% or more when the S. economy wasn’t either in or within six months of a recession.

• Existing home prices continue to decline as higher mortgage rates slow the housing market. The S&P CoreLogic Case-Schiller National Home Price Index fell 0.2% in January. That was the seventh straight month home prices nationally have declined.

• Big cities in the U.S. lost fewer residents last year as more immigrants moved in, fewer people died and more babies were born there, according to new census data that shows the mass exodus from the pandemic has cooled.

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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.

This newsletter was prepared by David M. Kover®. To unsubscribe from the Weekly Market Update please write us at 555 Eastport Centre Dr., Suite B, Valparaiso, IN 46383 or click this link:  Unsubscribe .

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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