Investment Commentary – May 10, 2023
Year to Date Market Indices as of May 10, 2023
• Dow 33,548 (1.82%)
• S&P 4,132 (7.28%)
• NASDAQ 12,254 (16.37%)
• OIL $73.02 (-9.39%)
• Barclay Bond Aggregate (2.91%)
• Gold 2,040 (11.49%)
Marketwatch: U.S. consumer price inflation below 5% for first time in two years
Headline inflation cools to 4.9% annual pace, core inflation ticks down to 5.5%
“Economists think there will be friendly year ago comparisons coming in the next few months as big increases from last year roll off the annual data.”
The numbers: U.S. consumer prices rose 0.4 % in April, up from a 0.1% gain in the prior month, the Labor Department said Wednesday.
However, over the past 12 months, consumer inflation increased 4.9% and that’s down from a 5% year-on-year increase in March and also down from a 9.1% rate last summer, which was the fastest pace since 1981.
Economists polled by the Wall Street Journal had forecast the CPI increasing 0.4% and advancing 5.0% over the past year.
Inflation minus food and energy, the so-called core rate, rose 0.4% in April for the second straight month, matching economists forecasts. The core rate increased 5.5% over the past 12 months down from a 5.6% gain in March and that’s down from a high of 6.6% last fall.
Key details: Shelter costs saw the largest increase in headline inflation but they are coming down. The 0.4% gain in shelter in April was the lowest in a year.
Used car prices spiked in April and so did gasoline prices.
The core rate gain was also boosted by car insurance and recreation.
Airline fares fell in April.
The CPI data is expected to play a big role in whether the Federal Reserve hikes interest rates again in June though markets are expecting no change in rates.
Market-moving news
Another jobs surprise
U.S. labor market performance continued to surprise on the upside, as the 253,000 jobs added in April exceeded expectations and topped the previous month’s downwardly revised figure of 165,000. The unemployment rate slipped to 3.4%, the lowest level since 1969.
Earnings outlook brightens
With roughly 85% of S&P 500 companies having reported first-quarter results as of Friday, key metrics this earnings season have come in better than their one-year averages, according to FactSet. In addition, the research firm reports that the overall earnings outlook for full-year 2023 has improved in recent weeks.
JP Morgan: Debt Ceiling: Déjà Vu
With the government up against its spending limit, negotiations are brewing in Congress. Investors’ best move now? Stay the course.
Spotlight: Guess who’s back, back again: Debt ceiling drama
The U.S. government has approached and exceeded the debt limit dozens of times throughout history, and in each instance, policymakers have eventually come to a compromise to raise the ceiling and avoid the worst-case scenarios. The best way for investors to prepare for potential disorder is by simply sticking with their long-term portfolio plan, built to weather events such as these.
In the long history of the debt limit, the impasse in 2011 carries the most notoriety. Congress increased the ceiling just before the X-date, the closest call on record. Days later, S&P downgraded the government’s credit rating to AA+ from AAA. Risk assets reacted negatively: the dollar sold off, stocks sank and credit spreads widened, but a strong rally in Treasuries led bonds higher overall. Outside of this instance, markets have been more driven by the prevailing economic and market dynamics of the time, and volatility was ultimately short-lived.
The U.S. government has approached and exceeded the debt limit dozens of times throughout history, and in each instance, policymakers have eventually come to a compromise to raise the ceiling and avoid the worst-case scenarios. The best way for investors to prepare for potential disorder is by simply sticking with their long-term portfolio plan, built to weather events such as these.
The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments.
https://www.marketwatch.com/ (Market Indices)
https://www.jhinvestments.com/weekly-market-recap (Around the Web & Upcoming Events)
https://finviz.com/groups.ashx (YTD Performance Chart)
https://www.marketwatch.com/story/u-s-consumer-price-inflation-cools-to-lowest-rate-in-two-years-in-april-ef69d854?mod=home-page
https://www.jhinvestments.com/weekly-market-recap#market-moving-news
https://www.jpmorgan.com/wealth-management/wealth-partners/insights/debt-ceiling-deja-vu
