The Stock Market Begins Quarter Number Two

April has historically been one of the top performing months since 1950

Author

Mark Roussin
April 03, 2023

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Market Talk ⏪

Best Quarter since Q4 2020: The stock market just concluded its first quarter for 2023, a quarter in which the S&P 500 was up over 7%. That is a solid start to the year, but that is nothing compared to the gains we saw in the tech heavy Nasdaq, which saw Q1 gains of nearly 17%, marking the best quarterly gain since the fourth quarter of 2020.

US Bonds: US Treasuries increased in the month of March, after many investors, especially after the mini banking crisis, expected that the Fed would be done with increasing rates and that we would potentially see rate cuts in the back half of the year.

What worked in ‘22 is not working in ‘23: Two of the best performing sectors in 2022 included Energy and Health Care. Energy was a big winner in 2022, with stocks like Exxon Mobil seeing gains over 70% during the year. However, these two sectors have lagged in 2023, as technology has been the big leader thus far. The Health Care Select SPDR and the Energy Select SPDR ETF are both down 4% and 1%, respectively, in 2023 thus far.

Stocks love April: If we go by history, well then April should be another good month for stocks. Historically, when it comes to the Dow Jones Industrial Average in particular, April has been the top month for returns. The average return for the month of April, dating back to 1950, is 1.9%. Adding to that, the Dow has increased 3.9% in the month of April in years preceding an election since 1950. For the S&P 500, April has been the 2nd best month for the index. April 2022 was the first negative performance in that month since 2005 for the Dow Jones Industrial Average.

On Pins And Needles: Regardless of the optimism within the stock market, or at least the appearance of optimism, investors still seem like they have more questions than answers. Investors are continuing to look for clues on the economy, which we will get with a new jobs report this week. Investors are also looking to figure out the strength or lack thereof of the US consumers. Lastly, trying to figure out a Fed’s monetary policy plan that recently got raised. We have been here before. Investors not believing the Fed, yet the Fed continues with the same wording on defeating inflation. One report that came out over the weekend regarding the labor force was the fact that McDonald’s is temporary closing their US offices as they prepare for layoffs, which are expected early in the week.

Earnings Declines On The Horizon: We are still about two weeks away from the kick off of earnings season, which could be ugly as we start to truly see a lot of deterioration in those moving forward, which could be a huge headwind for stocks. Optimism remains high, but the full impact of all these rate hikes combined with a mini banking crisis are yet to be priced in.

Jobs Report On Deck: On Friday we are expected to get an updated jobs report which will have a huge impact on the near term direction of the markets. Economists are looking for 235,000 added jobs from March, which would be a decrease from the 311,000 added in February.

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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, the markets just saw its strongest quarter since 2020, and as such, the Fear & Greed Index has gone from Extreme Fear a month ago, to fear, and now to Neutral. Currently, the index has a reading of 49, which is slightly up from the prior week reading of 34.

Earnings on Deck 💰

The earnings reports for the week:

Dividend News 📝

Here are some notable analyst upgrade/downgrades from the previous week:

  • Argus upgrades J.M. Smucker to buy from hold

  • Baird downgrades Caterpillar to underperform from neutral

  • BMO upgrades Equinix to outperform from market perform

  • Bank of America upgrades Paramount to buy from neutral

  • Morgan Stanley names Emerson Electric as a top pick

  • UBS downgrades Medtronic to sell from buy

  • JPMorgan upgrades Philip Morris to overweight from neutral

  • Evercore ISI upgrades Walmart to outperform from in line

  • Morgan Stanley downgrades Charles Schwab to equal weight from overweight

This Week 📆

Monday

  • Construction Spending

  • ISM Manufacturing

Tuesday

  • Factory Orders

  • JOLT Report

Wednesday

  • Mortgage Application

  • ADP

  • Trade Balance

  • ISM Service

Thursday

  • Initial claims

Friday (Market CLOSED)

  • Nonfarm Payrolls

  • Consumer Credit

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: 4 Dividend Stocks To Buy In April 2023

Here is the other video I published last week: The New Look SCHD: Still The Best Dividend ETF

Here are a few others of my latest videos:

If you enjoyed the newsletter, leave a LIKE and COMMENT down below. Also, if there is someone that could benefit from this newsletter, consider sharing it.

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Happy Investing!

Mark

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