By John Lau
April 6, 2023 – Sunday will be Easter. And Easter is a time to reflect on all the blessings in one’s life and to appreciate what one has. I am especially thankful for my family (Helen, Matt, and Jessica), for a great team at work, and for the partners I can collaborate with at Robertson Stephens.
Taking time to focus on those blessings helps provide needed context when I am worrying about a possible recession, banking stress, bond yields, inflation, corporate earnings, and the continuing war in Europe.
And by the time Memorial Day comes around in late May, we will have more clarity on:
- Fed Rate Hikes: Will the historic rate hike campaign end in May?
- Banking Crisis: Do any more regional banks fail?
- Economic growth: Does the U.S. economy hit a wall?
- Geopolitics: Will there be any peace progress in Ukraine?
- Earnings: Can current earnings expectations ($225 for 2023 and $240 for 2024) hold up?
Each of these events could cause volatility over the coming months, whether we like it or not.
Stocks have proven resilient recently, but if the economic data starts to consistently point towards an economic hard landing, then we should not be surprised if the S&P 500 drops and potentially revisits the recent lows near 3,800.
There are a lot of moving pieces in this market right now, but the most important influence on stocks is economic data, because if the data rolls over hard, it doesn’t matter if the Fed is pivoting – because it’s already too late and the economy is already behind the 8 ball (and that will hit stocks).
This month’s jobs report will be released tomorrow (April 7), on a day the market is closed, but the impact will be felt on Monday because the risks for this report are now two-sided!
- If the jobs report is too strong, it will increase rate hike concerns and hit stocks.
- If the jobs report is too weak, it will amplify the “hard landing” worries that have weighed on stocks this week.
So in addition to spending time with family and friends, I will also be focusing on the above issues this weekend because with the S&P 500 above 4000, a hard landing is not priced in, leaving this market vulnerable to a 5% – 10% pullback. My team and I will continue to stand on the wall watching over your portfolio.
Happy Easter.
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Disclosures
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