Market Musings 5/11/2023

Quick thoughts on the markets and major portfolio news. Not on Ursa yet? Download Ursa from the App Store!

Tentative start to April gives way to more bullish optimism with investors hungry to have their cake and eat it too…

Following March’s rally, markets began April very cautious with an eye on weakening economic data and uncertainty around Q1 earnings. However after a slow start (and strong #BigTech earnings), the S&P 500 finished April up +1.5%-now up +8.6% YTD.

April began with a lot of market unease amid weakening economic data. Bullish investor sentiment seemed to be waning following a lower than expected March jobs report, unexpected OPEC oil production cut and more hawkish than expected March Fed meeting minutes. Even a sharper decline in March CPI inflation barely moved the needle.

Then, earnings season kicked-off. As usual, banks reported first with an highly anticipated first glimpse into the sector after SVB’s failure. A lot of doubt was removed with issues stabilizing (at least for big banks) with stronger interest income forecasts driven by #RisingYields. (Of course, regional bank First Republic also failed at the start of May, but markets don’t seem as worried about systematic banking risk anymore.)

Then, came the anticipated #BigTech earnings. #BigTech had been leading the YTD market rally and many viewed (including us) their earnings and outlooks to be an inflection point to maintain bullish sentiment. It did not disappoint. #BigTech surged on the hyped #AI innovation cycle, digital ad recovery and bottoming PC market. The sideways trading market finally broke free and rallied in the last week of April on #BigTech optimism.

Investors continue to be hungry for the next bull market. One of the biggest factors continues to be the Fed’s #RisingYields plans. We continue to see investors justifying weakening economic data as catalysts for #FallingYields while believing strengthen economic data to be catalysts for a softer #Recession2023 landing. We believe there is a growing disconnect with investors hungry to have their cake and eat it too.

While likely bottoming here, we believe the market is likely to swing in this range until better visibility on when #FallingYields will begin and impact from #Recession2023. Given the ongoing aggressive market optimism, we’d still expect some correction to happen as we head into the summer.

We would recommend adding to portfolio on a regular basis at these levels and definitely take advantage of any market pullbacks.

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As of the publish date, Ursa portfolios do not own FRC with no plans to open any positions in the next 5 days.

The statements, opinions and analyses presented here are provided as general information. This article is the opinion of the author. Anything within this article should NOT be considered an investment recommendation or advice. See Ursa’s full disclosures here.

Original Photo by Pixabay