Monthly Economic Update – March 2023

Hey Friends! Here is March’s monthly newsletter. All the Best ~ The Madison Poole Crew

Presented by Madison Poole, March 2023

In this month’s recap: Stocks stumbled as investors worried that the Fed would maintain its tight monetary posture due to ongoing inflation.

U.S. Markets

Stock prices stumbled in February owing to growing worries that the Fed would maintain its tight monetary posture in the face of continuing inflation.
For the month, the Dow Jones Industrial Average lost 4.19 percent, whereas the Standard & Poor’s 500 Index fell 2.61 percent. The Nasdaq Composite, up nearly 11 percent in January, dipped 1.11 percent.1

Strong Start Stumbled

The month began the way January ended—with stocks climbing higher on solid earnings reports and encouraging inflation data. The markets enthusiastically greeted the Fed’s 25-basis-point hike in interest rates, relieved that the increase was in line with expectations. Spirits were further lifted by constructive comments made by Fed Chair Jerome Powell following the rate hike announcement.
The optimism did not last long, however. Stocks struggled as the direction of future monetary policy weighed on investors throughout the month.

Uncertainty with Interest Rates

Despite an initial upbeat assessment by Powell at the post-meeting press conference, a strong employment report fanned fears that the Fed would be unable to pause rate hikes anytime soon.2
By mid-month, a higher-than-expected increase in consumer prices, strong retail sales numbers, and a rise in producer prices made it clear that the Fed would need to remain vigilant.

Stocks’ Slide Continued

The slide in stock prices continued into the end of the month, dragged down by further rate hike concerns and disappointing guidance from two major retailers that called into question consumer health. Stocks felt even more pressure after January’s Personal Consumption Expenditures (PCE) price index—the Fed’s preferred benchmark for gauging inflation—reflected hotter-than-expected price increases and vigorous consumer spending.2

Sector Scorecard

One silver lining regarding the difficult month was that the technology sector, one of the worst- performing groups in 2022, notched a slight gain of 0.41 percent.
The remaining sectors retreated, however, including industrials (−0.86 percent), communications services (−2.87 percent), consumer discretionary (−2.13 percent), consumer staples (−2.32 percent), energy (−6.94 percent), financials (−2.22 percent), health care (−4.64 percent), materials (−3.33 percent), real estate (−5.86 percent), and utilities (−5.92 percent).3

What Investors May Be Talking About in March

The Federal Open Market Committee (FOMC) is scheduled to meet on March 21–22, and the Fed at its previous meeting indicated that it intends to raise short-term interest rates by another 0.25 percent.4
However, the Fed will now need to digest fresh information on the labor market and inflation that may impact its upcoming rate decision.
Investors will be keenly parsing the FOMC meeting announcement accompanying the FOMC’s decision while also paying close attention to comments by Fed Chair Powell, who holds a press conference immediately following the meeting announcement.
In the Fed’s previous meeting, Powell acknowledged that a disinflationary trend has emerged, but he also cautioned that the Fed will evaluate the labor market and new inflation data for further guidance.
As such, it may be more Powell’s comments, rather than the expected rate hike, that move markets and set the tone for the weeks to follow.

[panel style=”default” text_align=”left”]CITATIONS:
1., February 28, 2023
2., February 24, 2023
3., February 28, 2023
4., February 28, 2023
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Madison Poole | 208-898-7668 |

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