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