Fear Is Creeping Back Into The Markets

Stocks just completed their worst week of 2023

Author

Mark Roussin
February 27, 2023

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Market Talk ⏪

The optimism that had surrounded the stock market for much of 2023 seemed to exit the back door last week as the major indexes posted their worst week of the year. On the year, the Dow Jones Industrial moved into negative territory, while the other indexes are still holding onto annual gains.

Fear appears to be creeping back into the market. As you will see from the Fear & Greed Index below, optimism is falling and the options market is showing that as well. Last week we saw a surge in traders buying call options related to the CBOE Volatility Index, or VIX.

The VIX had been trading in ranges that have been considered low for much of the year. At the end of Q3 2022, the 50-day moving average for the VIX was 24.5. Today, that same moving average has fallen to 20.5x.

As I have been saying for quite some time now, I have and never was in the camp that believed the Fed would reverse course in 2023 and begin cutting rates. The Fed has been telling us this and the data is not showing enough improvement to warrant such a move. As such, investors are now coming to grips with even further rate hikes after a slew of strong economic data and inflation data showing things are still not (close) to where they should be.

The strength of the US economy and tight labor market also pushed out the likely recession until late 2023 or early 2024, as further rate hikes are likely on the way and will put more pressure on US businesses.

Given that I expect rate hikes to continue and to continue for longer, this does not bode well for the stock market, as I do not believe investors have fully priced this in yet. We saw a glimpse of it last week, which could continue in the days and weeks ahead as well.

Economic data last week showed core PCE inflation grew to 0.6% for the month and 4.7% year over year. Home sales posted their 12th straight monthly decline, as inflation and high interest rates continue to impact the sector. More inflation data will come this week, which will give investors more insight as to the impact of inflation. We will see Durable Goods orders today (Monday), Consumer Confidence report on Tuesday, and ISM manufacturing on Wednesday.

In international news, we saw the US send hundreds of troops to Taiwan to conduct training exercises, which is expected to irritate China and worsen the relationship between the two economic powers.

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US Markets 🇺🇸

Here is a performance summary for US Equities:

Here is a look at US Treasuries:

The Fear & Greed Index measures market sentiment based on the following seven factors: put/call ratios, junk bond demand, stock price breadth, market volatility, stock price strength, safe-haven demand, and market momentum.

When it comes to the Fear and Greed Index, we have now seen consecutive weeks with the index falling. The F&G Index is now on the cusp of falling from Greed into Neutral, which is fully what I expect this week as volatility appears to be creeping back into the markets. Currently, the index has a reading of 58, which is down from the prior week reading of 68.

Earnings on Deck 💰

The earnings reports are beginning to slow, with much of the S&P 500 already reported, but we still have some big names reporting this week, particularly out of the retail sector.

Dividend News 📝

Here are some notable dividend stocks going ex-dividend this week. You must own the stock PRIOR to the ex-dividend date in order to receive the next dividend payment.

MONDAY February 27th

  • Dover

  • Dow Inc

TUESDAY February 28th

  • Realty Income

  • Halliburton

  • Lockheed Martin

  • Wendy’s

WEDNESDAY March 1st

  • Qualcomm

THURSDAY March 2nd

  • Bank of America

  • PepsiCo

  • General Motors

  • Dominion Energy

FRIDAY March 3rd

  • Nike

This Week 📆

Monday

  • Durable orders

  • Pending home sales

  • Dallas Fed index

  • Speech by Fed Governor Philip Jefferson

Tuesday

  • Wholesale inventories

  • FHFA Home Price index

  • S&P/Case-Shiller home prices

  • Chicago PMI

  • Consumer confidence

  • Richmond Fed index

Wednesday

  • Construction spending

  • ISM Manufacturing

Thursday

  • Jobless claims

  • Unit labor costs and productivity

  • Speech by Fed Governor Christopher Waller

Friday

  • ISM Services PMI

  • Discussion from Fed Governor Michelle Bowman

Other Resources 📺

If you have not done so yet, definitely check out my growing YouTube community where I publish weekly videos on Dividend Stocks I am looking at.

Here is a look at my latest video: 3 MUST OWN REITs To Buy

I also recently published a video discussing 3 MONTHLY Dividend Paying Stocks:

Here are a few others of my latest videos:

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Happy Investing!

Mark

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