Markets “In a Nutshell” for March 27, 2023
Investment Week at a Glance
Stocks finished higher for the week. The Dow Jones Industrial Average rose 1.20%, the S&P 500 was up 1.4%, and the NASDAQ rose 1.70%. Foreign stocks (MSCI EAFE) were also up, rising 3.3%. Bond prices were up for the week, with the 10-year U.S. Treasury ending the week at 3.38%. (Data source: Wall Street Journal)
Fed Raises Rates By 0.25%
The Fed once again raised rates by 0.25% as they continue their battle of fighting inflation. This was the first time since they began raising rates that there was some question on if they would raise rates again. This is due to the pressure on the banking system that has come up in the last few weeks. Some believe this could be the last rate hike before the Fed pauses as the more they raise rates the more risk it brings to the banking system. The Fed also came out and said that these banking failures will cause tighter credit conditions which will weigh on economic activity and could help bring inflation down. The market has shifted its target for the fed funds rate from over 5% to around 4% which means the market is now expecting roughly 4 rate cuts by the end of 2023.
With the stress on the banking system and worries of a recession persisting, the market has seen volatility pick up over the last few weeks. Despite this, the S&P 500 is still positive on the year and the banking system seems to be taking care of the stress as other banks have stepped in to either buy the failing banks or pull together money and make large deposits. With many investors already expecting to see a recession this year, many believe the banking stress may pull it forward as tighter credit conditions come about. The market typically is ahead of the economy when it comes to a recession and the market could begin to look to a recovery which could drive the market higher. Short-term volatility allows investors to buy investments at lower prices and add quality positions to their portfolios.
With the technology sector leading the way this year, how much has the NASDAQ rose? (Scroll Down for Answer)
Have a Great Week!
2) 13%. The NASDAQ has risen 13% this year and outperformed all other major indices. Technology had been beaten up in 2022 as rates rose and companies realized they had over hired during the Pandemic. Since then they have been laying people off this year and rates seem to be peaking in the next couple months if not already.