January 23, 2023

The Markets

“It’s hard to be a contrarian for very long these days because the consensus seems to change so quickly,” opined Ed Yardeni via LinkedIn last week.
 
We’ve certainly seen a shift in investors’ preferences during the first few weeks of this year. Despite widespread expectations that markets would move lower early in 2023, major U.S. stock indices have trended higher. Year-to-date through January 20, 2023:

  • The Standard & Poor’s 500 Index, which is comprised of 500 of the largest publicly traded companies in the United States, was up 3.5 percent.
  • The Nasdaq Composite, which is comprised of stocks listed on the Nasdaq Stock Exchange and includes a significant number of technology stocks, was up 6.4 percent.
  • The Dow Jones Industrial Average, which is comprised of 30 large U.S. stocks, was up 0.69 percent.

The year-to-date gains reflected stock investors’ optimism about where the economy may be headed, reported Nicholas Jasinski of Barron’s.
 
“Stocks have embraced the concept of a soft landing so far in 2023…The communication-services and consumer-discretionary sectors of the S&P 500 are trouncing the market, each up at least 5% year to date. Defensive consumer-staples, utilities, and healthcare stocks, on the other hand, have declined more than 2%. If stock investors were worried about a recession, shares of companies that sell electricity, toilet paper, and [cereal] should be doing better than riskier firms in more discretionary areas. They’re not.”
 
That’s a significant change from last year when the communication services and consumer discretionary sectors were the worst performers in the S&P 500, and energy and utilities were the top performers.
 
It’s quite possible we will see another shift in investors’ expectations so be prepared for a bumpy ride.
 
Major U.S. stock indices delivered mixed performance last week. The S&P 500 and Dow moved lower over the five-day period, while the Nasdaq moved higher. Yields on longer-dated U.S. Treasuries finished the week lower.

Required Disclosures:
* These views are those of Carson Coaching, not the presenting Representative, the Representative’s Broker/Dealer, or Registered Investment Advisor, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm or broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the 3:00 p.m. (London time) gold price as reported by the London Bullion Market Association and is expressed in U.S. Dollars per fine troy ounce. The source for gold data is Federal Reserve Bank of St. Louis (FRED), https://fred.stlouisfed.org/series/GOLDPMGBD228NLBM.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.

Sources:
https://www.linkedin.com/pulse/pessimistic-consensus-edward-yardeni/ (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/01-23-23_LinkedIn_Pessimistic%20Consensus_1.pdf)
https://www.barrons.com/market-data?mod=BOL_TOPNAV (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/01-23-23_Barrons%20Data_2.pdf)
https://www.barrons.com/articles/stock-market-dow-nasdaq-sp500-51674262537?refsec=the-trader&mod=topics_the-trader (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/01-23-23_Barrons_Stocks%20and%20Bonds%20are%20Sending%20Different%20Messages_3.pdf)
https://www.spglobal.com/spdji/en/documents/performance-reports/dashboard-us-sector.pdf
https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202301
https://stories.wf.com/wp-content/uploads/2022/12/Wells-Fargo-Financial-Planning-Survey-Report.pdf (Page 2)
https://www.cdc.gov/nchs/data/vsrr/vsrr023.pdf