Markets Stuck Among Crosswinds

By Scott Poore, AIF, AWMA, APMA
Chief Investment Officer, Eudaimonia Group

Markets are stuck in a holding pattern as interest rates, the debt ceiling, and banking woes keep equities tamped down.  The Housing and Manufacturing plethora of data may get ignored by investors in lieu of multiple Fed speakers this week.  As we enter the latter part of earnings season, 92% of S&P companies have reported Q1 Earnings.  So far, 78% of companies have beat on earnings expectations, which is above the 10-year average.  Markets are still dealing with concerns over the banking sector.  PacWest Bancorp indicated that deposits had dropped by 9.5% in the previous week.  Despite the company’s assurance that at least $15 billion was immediately-available for liquidity, the company’s stock price dropped last week.  Meanwhile, Money Market flows declined for the 2nd consecutive week, which indicates there's not a lot of panic in trading right now.

The Fed’s continued rate hikes has put banks in a tough spot and it shows in the latest Gallup poll where Fed Chairman Powell’s confidence rating is at a low compared to his predecessors.  Inflation dropped for the 10th consecutive month as April’s release proved that inflation is not as “sticky” as the Fed might indicate.  The debt ceiling showdown has recently become a concern, but perhaps overblown by the media.  Since 1960, the debt limit has been raised, extended, or revised 78 separate times.  Much of the current issues are really political theater.  Expect more choppiness this week as multiple Fed speakers, including Powell, will opine about rates and inflation.

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