April 5, 2023
MarketGauge Weekly Market Outlook
By Keith Schneider and Donn Goodman
Whether you look at the markets as a chart reader or a fundamental investor, March was a roller coaster of price action and emotion. There’s good reason to believe that April will pick up where March left off.
The first half of March broke below big bearish chart levels and whole month was filled with unprecedented unsettling news such as:
- 2nd and 3rd largest bank collapses in U.S. history
- Multiple countries ditch the U.S. Dollar for the Chinese Yuan
- Interest rates raised to their highest levels since 2007
- Collapse of Credit Suisse, one of the world’s largest banks, in under 48 hours
- President Trump indicted, first U.S. president to face criminal charges
What a month… and yet the stock performance shrugged it off in a pattern that history predicted with uncanny accuracy.
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As we reported last month, March is historically strong in the second half of the month, and last month followed its historical trend despite plenty of bearish headwinds.
As you can see from the table below, April has an impressively bullish record, especially in pre-election years, and this year it has several additional patterns as tailwinds.
With stats like that it’s not surprising that April is the second most profitable month of the year.
Having said that, please be aware of some potential land mines that could derail this scenario. The top 3 of 8 included in this week’s Market Outlook include:
- The Banking crisis may not be over. There may be more damage to come from banks with similar problems. This could further derail the financial sector of the market. In order for the stock market to continue its positive move higher, financials will have to participate.
- Higher rates and inverted yield curves may mean a continued slow down in the economy which could lead to a recession later in 2023 or early 2024. Some people, as we have reported in previous Market Outlooks, believe a recession is inevitable. This could take some of the wind out of the market’s momentum.
- Future earnings expectations could be lowered by corporate America. The market(s) are still selling at elevated earnings valuations. These could be knocked down if businesses see a slowdown and this will affect analysts’ expectations for earnings growth. Many analysts believe that the market is overvalued and we could get a repricing of assets, especially if we encounter a negative GDP for two consecutive quarters.
Click here to continue reading the additional potential bearish land mines and additional bullish pattern that will influence the market going forward.