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Market Recap

May 01, 2023

Historically April is the second-best month for the stock market, posting positive returns 74.3% of the time.1 This April continued that trend, although it’s obviously too soon to know where April will rank among the remaining 8 months of the 2023 calendar year.

In general, stocks traded in a very narrow range in the second half of April. In fact, volatility for the month of April, as measured by the Volatility Index (VIX) fell to the lowest level since November 4, 2021.2

We are well into earnings season for Q1, so we do anticipate some volatility as company earnings reports beat, miss or surprise analyst expectations. Of the companies that have already released reports, earnings appear to be down 5-6% but are still hanging in there.

Meanwhile, U.S. economic growth, as measured by Gross Domestic Product (GDP) slowed significantly but did remain positive. Economists were surprised by the Quarter 1 GDP rate of 1.1%, which was down from 2.6% in Quarter 4, 2022.3 

The next regularly scheduled meeting of the Federal Reserve (Fed) is the first week of May. It is widely expected that the Fed will raise rates another 0.25% and then debate a prolonged “pause” in rate increases. Discussions are also beginning on whether we may see a rate cut this calendar year.

Attention is also focused on the financial sector as the San Francisco-based regional bank First Republic grapples with a mass deposit exodus (reports indicate that they lost roughly 40% of their deposits in the first quarter). Fears of a bank collapse like last month’s Silicon Valley Bank, which had a similar profile are resurfacing. As of Friday, First Republic is reviewing strategic options to help reshape its balance sheet. Earlier in the week 11 larger banks infused $30 billion into First Republic in an attempt to instill confidence and prevent a bank run.4 [In breaking news, the FDIC took control over First Republic over the weekend and then oversaw its sale to JPMorgan Chase. Branches opened the morning of May 1 as new JPMorgan Chase locations.]

At this point, we are not fearful of an impending banking collapse. According to a U.S. Treasury spokesperson, “Americans should feel confident in the safety of their deposits and the ability of the banking system to fulfill its essential function of providing credit to businesses and families.” Jamie Dimon, CEO of JPMorgan Chase Bank echoed confidence in the banking system, “The system is very, very sound.”5

Reviewing returns for the second half of April, the markets all posted modest gains. As of April 28th, the Dow rose 212 points (0.62%), the S&P 500 gained 32 points (0.77%) and the NASDAQ increased 103 points (0.85%).

1 “The Best Months for Stock Market Gains” June 1, 2022

2,3 “Weekly Market Recap; Ween ended April 20” May 1, 2023

4 “First Republic’s dramatic slide continues, stock falls 30% as bank looks for rescue deal” April 26, 2023 “JPMorgan Chase buys troubled First Republic Bank after U.S. government takeover” May 1, 2023 

The views and opinions expressed herein are those of the author(s) noted and may or may not represent the views of Capital Analysts or Lincoln Investment. The material presented is provided for informational purposes only. Past performance is no guarantee of future results. No person or system can predict the market. There is no guarantee that any strategies discussed will result in a positive outcome. All investing involves risk and no investment strategy can guarantee a profit or protect against loss, including the potential loss of principal. S&P 500 Index is an index of 500 of the largest exchange-traded stocks in the US from a broad range of industries whose collective performance mirrors the overall stock market. The NASDAQ is an index that tracks the cumulative results on a market capitalization basis of all stocks trading in the NASDAQ system. The Dow Jones Industrial Average is a widely watched index of 30 American stocks thought to represent the pulse of the American economy and markets. Investors cannot invest directly in an index. Diversification does not guarantee a profit or protect against a loss.