For the last 8 months interest rates have been dictating market movement

April 5, 2023

For the last 8 months interest rates have been dictating market movement and we expected that to continue in March.  However, the surprise collapse of Silicon Valley Bank was a game changer that had the Fed scrambling to stabilize the banking system and avoid another 2008 type event.  At month end it appeared the worst of the crisis was behind us, but this is like an earthquake and there are bound to be aftershocks.  The silver lining in the banking issues is a likely slowdown in economic activity and inflation that may allow the Fed to soon stop raising interest rates.  In his comments near month end Fed Chief Powell suggested they are getting close to done with their historic interest rate increases.  After hitting a 2023 low in the middle of the month the market rebounded and at month end the S&P 500 was up 3.5% for the month and finished Q1 with a gain of 7%.   Oil hit a 15-month low mid-month but closed just 2% lower.  Gold benefited from a decline in the dollar, hitting an 11-month high during the month before closing with a gain of nearly 8%.

The month began in the middle of the week with the rate on the 2-year Treasury hitting the highest level in 16 years.  However, the market rallied in the early going after a couple Fed Governors said they need to “go slow” with rate increases.  After 3 days of trading the S&P 500 had gained 1.9%. The headline news during the first full week of the month was supposed to be Fed Chief Powell’s Congressional testimony, but the collapse of Silicon Valley Bank took over the news cycle and sent the S&P 500 down 4.5%, its worst weekly performance this year.  The second full week was spent watching bank regulators put together some “shotgun weddings” with financial institutions and generally do whatever possible to calm the waters.  At the end of the week the S&P 500 had managed to rebound by 1.5%.  The recovery in the banking sector continued into the 3^rd full week on news UBS had agreed to buy troubled Credit Suisse.  Comments from Janet Yellen mid-week that the government was not working on a plan for “blanket insurance” was a setback for the market, but the S&P 500 managed to gain another 1.4% for the week.  The final week of the month saw a continuation of the rally with regional banks stabilizing and technology names rallying.  The volatile month ended with a 3^rd straight week of gains.

April is traditionally one of the better months for stock market performance as money flows into retirement accounts before the tax deadline.  The month is tied with December as the second-best performing month over the last 50 years and is more likely to close higher than any month other than December.  The Federal Reserve does not have a meeting in April, so it is unlikely we will see an increase in the Fed Funds rate.  The Consumer Price Index Report on April 12^th and the arguably more important Personal Consumption Report on April 28^th will both be closely watched.  The banking crisis seems to be diminishing, but don’t be surprised if we see an “after shock” or two during April.  The banking crisis is likely to result in tighter credit over the next few months and we will watch for evidence.  The S&P 500 ended March on a 3-week rally, but we have been defensive for a number of months and continue to believe that is the most prudent approach in the short term.

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.