Affinity "Mark" et Minute - May 18, 2023 - Affinity Asset Management

Affinity “Mark” et Minute – May 18, 2023

Investment Commentary – May 16, 2023
Year to Date Market Indices as of March 16, 2023

• Dow 33,012 (-0.41%)
• S&P 4,109 (7.04%)
• NASDAQ 12,343 (17.93%)
• OIL $70.53 (-12.40%)
• Barclay Bond Aggregate (1.98%)
• Gold $1,993 (8.91%)

J.P. Morgan Market Update

The end of the 1Q23 earnings season is approaching, and the results continue to look better than expected.

Profits The end of the 1Q23 earnings season is approaching, and results continue to look better than expected. With 462 companies having reported (90.8% of market cap), our current estimate for 1Q23 operating earnings per share is $53.42. If realized, this would represent y/y growth of 8.2% and q/q growth of 6.1%. So far, 69% of companies have beaten earnings expectations, while 66% have beaten revenue expectations. Importantly, profit margins bounced in 1Q23, with our current estimate tracking 12%.

Real GDP grew by a 1.1% annualized rate in 1Q23, a sharp deceleration compared to last quarter’s 2.6% pace. Consumption and government spending looked strong, growing at annualized rates of 3.7% and 4.7%, respectively. However, most of the consumption gains can be attributed to a strong January. These gains were partially offset by declines in private inventories and residential fixed investment. In particular, equipment spending fell sharply, indicating a slowdown in business investment spending. Looking ahead, normalizing inventory levels should support growth, but a strained consumer, tighter lending conditions and weaker business spending remain headwinds in the coming months.

Market-moving news

While the latest week’s decline in crude oil prices was modest, it marked the fourth negative week in a row. U.S. crude was trading around $70 per barrel on Friday, down from a recent peak of more than $83 on April 12. At the end of 2022, oil was trading around $80.

Bond stability

As with the modest moves seen in the U.S. stock market recently, volatility in the government bond market has also eased relative to the big moves seen in early March. Since then, the 10-year U.S. Treasury bond yield has moved in a narrow range of as high as 3.60% to as low as 3.29%, with Friday’s yield at around 3.46%. In early March, it peaked at 4.07%.

Earnings scorecard

With 92% of S&P 500 companies having reported first-quarter results as of Friday, the proportion of S&P 500 companies that have beaten analysts’ earnings expectations remained slightly higher than usual. So far, 78% of companies have exceeded net income expectations, topping the 10-year average of 73%, according to FactSet.

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

About the Author: Mark Roberts

In addition to managing clients’ money and giving investment and diversification advice, Mark offers something that “the other guys” don’t - a unique approach to Retirement Tax Strategies and distribution. Time and time again, Mark meets with new clients who tell him they have a great relationship with their financial advisor but have never been offered information on this kind of approach to securing their financial futures. Mark has taken this feedback to heart and works tirelessly to ensure that his strategies focus on taxes and distribution. Mark started selling insurance for a major insurance company right out of high school to help put himself through college. After graduating with a degree in finance, he dove into estate planning on the financial side to set himself apart from other financial advisors. However, as changes were made to estate tax laws over time, Mark shifted his focus to income tax strategies. Mark’s philosophy is “the blue prints are more important than the wall paper or carpet.” The wall paper and carpet represent products like investments and insurance policies, whereas the blue prints represent the strategies. Once strategies that truly fit the client’s needs are put in place, our focus can shift to providing you with the right products. According to Mark, “It doesn’t matter what carpet we use if the walls are not in the right place.” Our approach to money management is designed to generate the largest alpha (quality) with the lowest standard deviation and beta (risk). By doing this, we help provide clients with the highest return on the lowest risk. Generating income for our retirees is also very important. Because withdrawing money from your portfolio hurts the account rather than helping it, our goal is to design income strategies to harm the portfolio the least making the money last longer.

Affinity “Mark” et Minute – May 18, 2023

Affinity “Mark” et Minute – May 18, 2023

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About the Author: Mark Roberts