Hello all - we hope you had as nice an April as the markets did.
It was another month for the record books, but at least this time it was positive. After the war in Iran caused stocks to have their worst month in four years, markets rebounded for their best month in over five years. For April, Dow was up 7.7%, the S&P 500 gained 10.5%, and the Nasdaq, which has a higher concentration of tech stocks, shot up 15.7% for its best month in six years.
It was another month for the record books, but at least this time it was positive. After the war in Iran caused stocks to have their worst month in four years, markets rebounded for their best month in over five years. For April, Dow was up 7.7%, the S&P 500 gained 10.5%, and the Nasdaq, which has a higher concentration of tech stocks, shot up 15.7% for its best month in six years.
Here’s a look at how the markets moved this month:
The market is now back to its average return level.
Here’s a look at how the various market sectors performed this month.
Volatility subsided in a big way.
Oil prices also rose sharply since the beginning of the war. Prices fell when the fighting subsided, but have risen again with the blocking of the Straight of Hormuz. The longer this continues, the higher oil prices will go.
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CORPORATE EARNINGS
Surprisingly, corporate earnings have been very, very good and the results have been the best in several years.
Numbers for the first quarter began trickling in this month and we’re about 70% through the companies in the S&P 500. Companies are on pace to grow their earnings almost 20%. Revenue, what a company made in sales, are at the highest level in 15 years.
These numbers help explain the higher market values.
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FED
The Fed was in the news again this month.
First, it appears the nomination for the new Fed Chief, Kevin Warsh, has gotten the green light to go ahead. This is a very positive development.
Second, the Fed held another policy meeting this month, announcing no changes in the interest rate. This was widely expected, so the market didn’t see a lot of action on the news.
Investors don’t see the Fed lowering rates any time this year, either.
This also marked the last meeting for Fed Chief Powell, although he announced he will remain on the board until his term is up in 2028. It does set up the potential for drama as other Fed members suggested they had no interest in lowering rates.
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INFLATION
Inflation numbers released this month showed a sharp increase in inflation due to the Iran war.
The month-to-month number shows a massive jump in prices.
Most of the jump in prices was due to gas. Note that this measurement covers the month of March, which saw gas rise over 21% during that time.
When excluding food and energy (what economists call the “core” inflation), prices are up, but not as bad (since most of the gains were in gas).
Here’s a look at the inflation level for businesses, which wasn’t as bad as expected.
Here’s a look at the price rises of some other important items.
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OTHER ECONOMIC DATA
Other economic data releases were mixed this month, though not as bad as they could have been.
Economic growth as measured by the GDP report came in at a decent 2%.
Employment saw a surprising improvement as more jobs were added than expected.
The manufacturing sector continues to look solid, but the service side of our economy weakened slightly.
Retail sales showed a decent increase.
Durable goods were up slightly.
Consumer confidence continues has been trending lower, but showed a slight improvement this month.
On the other hand, small businesses were less optimistic.
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Where does the market go from here?
Last month the market was very oversold and looked primed for a bounce. The market did just that, but now things are looking a little more expensive. Maybe the market grinds higher here, but we’re much less enthusiastic on stocks at this time. A lot depends on the war with Iran, too, but we don’t see significantly more upside.
This commentary is for informational purposes and is not investment advice, an indicator of future performance, a solicitation, an offer to buy or sell, or a recommendation for any security. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing. Past performance cannot guarantee results.
