Typical April Gain

May 1, 2023

April is traditionally one of the better months for stock market performance as last-minute money flows into retirement accounts.  With that said, history is merely a guide as last year we saw the market plunge nearly 8% in April.  In addition to cash inflows into retirement accounts, April market action is also driven by a plethora of corporate earnings reports from Q1.  With the economic slowdown being orchestrated by the Fed corporate earnings reports were very important this month.  Investors were interested to see what impact the slowing was having on corporations.  The market had gained 7% in the first quarter, and we wondered if those gains could hold in the face of what were likely to be slowing corporate earnings.  Surprisingly, the biggest takeaway of the month was how little the market reacted to the plethora of earnings reports.  Coming into the last few days the S&P 500 was down about 1.5% for the month, but strong earnings from the technology sector ignited a month-end rally that left the S&P 500 1.5% higher for April and up 8.6% for the year.  Oil jumped to a 5-month high during the month, but at month-end was up just $1.   Gold traded above 2000 several times during the month and at the end of the month was up $13.

 

The month began with a week that was shortened by the Good Friday holiday.  The regional banking crisis was still on investors’ minds, but prices did stabilize.  There was some selling of technology stocks ahead of earnings, but the week ended with the S&P 500 losing just 4 points.  During the second week we learned both CPI and PPI continued to decline in March and that gave the market a boost.  Early earnings from the major banks were better than some had feared and that helped the S&P 500 end the week with a gain of .8%.  During the third week a flood of earnings reports did little to move the market.  A disappointing report from Tesla on Thursday ignited a market decline, but a late rally erased much of the loss.  At the end of the week the S&P 500 once again showed little change, dropping just 4 points.  The last week was the busiest week for earnings reports this quarter, but earnings report took a back seat to the regional banking crisis, as poster child First Republic reported they had lost nearly 50% of their deposits during the first quarter, much more than most had expected.  That report sent the market lower on Thursday and back into the red for the month, but a strong report from Meta sent the market sharply higher on Thursday and back into the black for the month.

 

There is an old Wall Street adage “sell in May and go away” that harkens back to days when communications were limited, and traders would often liquidate before starting their summer vacations.  Despite improved communications May is still one of just 2 months where the market has historically lost ground.  We know the Federal Reserve (Fed) is trying to slow the economy to quell inflation and they will be successful.  Market valuations are above historic norms and two ways to bring values into line are increased corporate earnings or falling stock prices.  In an environment where the Fed is trying to slow the economy it would be counter-intuitive to expect earnings to increase, which leaves falling stock prices.  We have been “playing defense” during this period of Fed tightening and continue to believe that is the prudent approach.

 

If you know someone who would be interested in learning more about Greenberg Financial Group, please contact us at 520-544-4909, or visit our website at www.greenbergfinancial.com. As always, the key to successful investing is to have a portfolio that is consistent with your investment objectives and risk tolerance. We invite you to listen to our weekly Money Matters radio show which airs every Sunday Morning from 8:00 AM to 10:00 AM on KNST AM 790.  You can also listen to us on iHeart radio, follow us on Twitter @gbergfinancial or on Facebook under Greenberg Financial Group.  Previous radio shows are available by going to www.iheart.com or using the iHeart app and typing Money Matters with Dean Greenberg.