Market Commentary - April 2023
April 14, 2023
For your convenience, below are a few summary highlights from our Investment Strategy Group’s Quarterly Market Commentary for April 2023:
- Global equity markets closed out a positive quarter, as investors were buoyed by cooling inflation data and a growing sentiment that central banks could pause rate hikes later in the year. In the U.S., the S&P 500 rose 7.5% in the first quarter. Asian and European markets were stronger during the period, with similar signs of a peak in inflation.
- To continue to combat inflation, the Federal Reserve maintained its hawkish policy with a 25-bps interest rate hike in March, bringing the Federal Funds target rate to 4.75-5.00%. Future Fed rate hikes have mainly become data dependent due to banking stress and slowing credit growth.
- Economic data remains relatively stable in the U.S., with positive real GDP growth and continued strength in the labor market. Unemployment came in at 3.5%, as 236,000 jobs were added in March. While wage growth remains strong, it did moderate to 4.2% from a peak of 5.6% last March and 4.6% in January. Further moderation is key to bringing inflation back to the Fed’s 2% target.
- Inflation has finally started to trend lower on a sustained basis. The Consumer Price Index (CPI) softened to 5.0% to end the quarter, after reaching a 40-year high of 9.1% in June 2022. Core prices, excluding more volatile food and energy categories, were up to 5.6% in March. While goods inflation begin abating last summer, trends in services inflation are now normalizing as well.