It was all about earnings this week as nearly a third of the S&P 500 companies along with about half of the Dow Jones constituents released first quarter numbers. One thing is certain, the technology related sectors are surprising us all with their amazing bounce back from the 2022 doldrums. I think you know by now that I love to talk about history when it comes to our financial markets. For this week’s update, I present you with this interesting graphic.
2022 | 2023 | (through 4/21) | ||||||||
Top Three S&P 500 Sectors | Top Three S&P 500 Sectors | |||||||||
Energy | 65.72% | Communication Services | 20.50% | |||||||
Consumer Staples | -0.62% | Information Technology | 19.50% | |||||||
Utilities | 1.57% | Consumer Discretionary | 14.80% | |||||||
Bottom Three S&P 500 Sectors | Bottom Three S&P 500 Sectors | |||||||||
Communication Services | -39.89% | Financials | -2.40% | |||||||
Consumer Discretionary | -37.03% | Energy | -1.90% | |||||||
Information Technology | -28.19% | Health Care | -0.80% | |||||||
Source: Franklin Templeton Weekly Update | ||||||||||
The highlighted areas tell quite a story when it comes to reasons for staying the course when investing in high quality companies. Now of course, if we had the crystal ball working, we would have gladly sold out of these areas at the end of 2021 and then happily rejoined the party to start off in 2023. But that really isn’t realistic in the big picture and trying to “time” our investing only causes more harm than good for the most part. What we have seen over the past weeks illustrates that certain companies (META, AMZN, and MSFT for example) have been making the right moves to return to a higher level of profitability. Some of that has come in the form of layoffs, reduced spending, and simple balance sheet maneuvers, but either way, the moves are paying off. This does not mean that these companies are out of the woods, but it does prove that quality management teams will persevere and find a way to get it done. This is only one industry example; the technology sectors were hit hard and fast throughout 2022. They were the first in line to face the now growing slowdown we are seeing. But what it tells us is very meaningful. As other industries face the punching bag so to speak, quality will prevail in the long run.
The other major, overarching theme for the week is the dreaded debt ceiling. Oh yeah, that big ball of yarn is quickly unraveling! The GOP leaning House narrowly passed a spending and budget bill on Wednesday. This now puts added pressure on the Senate to follow suit with their own version in the weeks ahead. President Biden has made his agenda clear on what he wants for several weeks now, so the rhetoric and infighting will only get more amped up from here. I think it’s safe to say that no one wants to see another shutdown of our government, but we are still left to wonder how far each side will push the envelope. As more candidates enter the next Presidential election push in the months ahead, these types of issues will be at the top of the finger pointing list. There is no doubt that spending is out of control in many ways, but continuing to kick the can down the road will only make it that much worse for the next generations. Being the ever optimist, it is my hope that more of the moderates from each side can come together to solve these issues at hand. It may be a dream for now, but all this could make for an even more messy summer ahead, at least in the world of politics.
Gross Domestic Product (GDP) rose by 1.1% in the first quarter, illustrating yet another sign of the economy slowing. Estimates for the first quarter were 2%, so weaker than anticipated, but not surprising. Plenty of other economic data has shown similar readings as inflation and consumption play out in the near term. Honestly, there is no surprise in this, and it is being reflected in our own personal habits as we adjust accordingly. Our financial markets have remained on the plus side this year and given all the noise, I view this as a good sign. I have maintained for some time, and I continue to believe, that anything in the green at the end of 2023 would be a mark in the win column. We know there are plenty of headwinds ahead, but I still believe we can maintain this status, even if that means we trend sideways from here. Sometimes we need to just close out our side and rearview mirrors and focus on the road in front of us. That other stuff is often a distraction put there for a purpose that serves no one.
Have a great weekend!
https://www.cnbc.com/2023/04/27/amazon-amzn-q1-earnings-report-2023.html
https://www.cnbc.com/2023/04/27/gdp-q1-2023-.html?&qsearchterm=gdp
Christopher E. Wasson, CFP®
President
Mosaic Asset Partners, LLC
1122 Kenilworth Drive, Suite 310
Towson, MD 21204
410.821.0089 fax 410.821.5993
MosaicAssetPartners.com
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The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.