Churchill Management Group Monthly Market Update
by Craig Love, on May 04, 2023
- Despite concerns over inflation and earnings declines, stocks have been hanging tough.
- Inflation has been the chief concern for the economy. The good news is that inflation is clearly coming down from its high levels. However, core prices – the Fed’s preferred measure of inflation which excludes food and energy – has been stickier than hoped.
- Stock returns have been narrowly focused year to date. Large-cap Tech has carried the market with eight Mega cap stocks making up 6.44% of the 7.65% gain in the S&P 500 year to date.
- On the economic front, the Fed recently raised rates 25 bps and signaled that a pause could be at hand but that would depend on incoming data.
- Another potential market-moving economic release is Friday’s jobs report. A strong jobs number would affirm the Fed’s recent mantra of higher for longer in terms of rates while a weaker number would boost the case for a pivot happening sooner.
- An area of concern is the top-heavy nature of the market mentioned above. Consider the breadth in the Nasdaq. The cumulative advance-decline line is currently sitting around the lows for this cycle.
- While we have seen plenty of volatility over the last year, it is surprising to many that the S&P 500 trades around the same levels it was at this time in 2022.
- The indices have essentially traded sideways between 3600 and 4200. Hopefully, the long trading range turns out to be a classic bottoming process that historically follows a bear market before a recovery.
- Whether it will ultimately be defined as a bottoming process will only be known in retrospect.
- However, for now, the back-and-forth action certainly gives hope for one. With the rest of earnings season rolling out in the next couple of weeks, including the behemoth in Apple, the market still faces some tests ahead.
Regards,
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.
