April 17, 2023
First Quarter Highlights
Financial Markets
- Equities rallied early in the quarter as cooling inflation drove expectations for a near-term end to rate hikes, but stronger than expected economic data shifted those expectations and a bank crisis caused stocks to pull-back briefly before rallying again late in the quarter as worries eased.
- The bond market had unusually large swings in reaction to changing forecasts for rate hikes and the flight to safety after the bank failures. For example, the 2-year Treasury bond yield hit the highest level since 2007 but quickly fell back to levels of six months ago.
- Energy prices were sharply lower on weak demand. Industrial metals prices were mixed. Gold rose to a near record high on the flight to safety.
Overview of the Economy
- Fourth quarter 2022 earnings reports were generally lower than expected due to rising costs and weakening demand. Many companies gave a cautious outlook for 2023 and announced various cost cutting measures.
- S. payroll employment surged in the first two months of 2023. The labor market remains tight despite headlines of large layoffs at major companies.
- The consumer price index (CPI) in several countries has declined but remains at multi-decade highs.
- Surveys showed slowing growth rates for manufacturing and but services activity is picking up around the world.
Notable Events
- Central banks around the world continue to battle inflation by raising interest rates. The Federal Reserve Open Market Committee (Fed) raised its policy rate twice during the quarter.
- Three banks in the U.S. failed in March and a major bank in Europe collapsed and was bought by a rival fueling fears about a credit crunch.
For an in-depth analysis of the quarter, please download the PDF: http://vogelcg.com/wp-content/uploads/Quarterly-Market-Report-Q1-2023.pdf
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