Churchill Management Group Monthly Market Update
by Craig Love, on March 16, 2023
- Volatility has returned to the markets as investors attempt to sort out a cross-current of concerns.
- After starting the year with a bang, stocks had started to cool their ascent at the start of February even before the Silicon Valley Bank (SVB) news last week.
- About half of that decline has happened since the SVB news broke. While the hope is that the Fed has stemmed the issue, the incident has put greater emphasis on banks and their balance sheets.
- Fundamentally, inflation concerns continue to hang over the market.
- Tuesday, CPI came out at a 6% annual rate, the eighth consecutive month of a decline in annual CPI.
- While that is heading in the right direction, the issue is that six percent is still a ways from the Fed’s stated goal of two percent, and the eight months of decline followed sixteen months of CPI increases.
- So all eyes are back on the “guess what the Fed will do” game. Will they pause rate hikes on the back of the SVB issue? Is it an aggressive 50bps to get this inflation stomped out?
- As a result, stocks could see some back and forth as the narrative quickly changes. The current focus has turned from fear of inflation to worries about declining earnings and a potential recession.
- Prior to the bank problem, technical charts looked ok. The market backed off, as is normal after the big rally we had to start the year.
- In sum, the picture remains murky. If we see further weakness, it could signal that we had a failed breakout, meaning that the bear market may not be over. In that case, we would seek to take a step back.
CHURCHILL MANAGEMENT GROUP
Source: Churchill Management Group
** This report is meant to inform the reader of our current market opinion, which we, as professional money managers, use in our decision-making. It should be noted that stock market and bond market data are subject to varying interpretations and any one interpretation will not necessarily guarantee investment success. The information obtained from the sources specified herein and used as basis for our current market opinion is believed reliable, but we do not guarantee the accuracy of such information.