It's been a very good year for stocks...so far
The market is off to a hot start of 2023. Will the Wall Street bulls keep raging?
Cue the Frank Sinatra. Like the Chairman of the Board once sang, it’s been a very good year.
The Dow is up nearly 4% so far in 2023. That’s respectable…but the DJIA is still a major laggard. The S&P 500 has gained about 16% while the Nasdaq has soared more than 30%.
Tech stocks are roaring. Apple’s market cap topped $3 trillion Friday morning and its fellow FAANGS (even though Facebook is now Meta and Google is Alphabet) have surged too, along with Microsoft, Nvidia and Tesla.
But can the market maintain its momentum? Keep in mind that earnings and sales growth are still forecast to be somewhat sluggish for the remainder of the year. The hope is that profits and revenue pick up in 2024.
How reasonable is that expectation though? Yes, the economy is still doing reasonably well. GDP for the first quarter was revised higher this week to 2% annualized growth.
Still, inflation has clearly taken its toll on consumers and we’ve seen that come through in the recent earnings reports and forecasts of several retailers and consumer goods companies. Price pressures might be finally moderating. But the Federal Reserve may not be done hiking rates yet. Futures are now pricing in a nearly 90% chance of a hike in July.
Speculation has returned as well. Meme stocks such as GameStop and Palantir are up sharply this year. Crypto has made a comeback too, thanks to the news of filings for spot bitcoin ETFs from BlackRock and Fidelity.
I’m not suggesting that the market is about to crash. But further market gains may be tougher to come by. Valuations are getting frothier. The CNN Business Fear & Greed Index (which I helped create during my two-decades stint there) is showing signs of Extreme Greed. Since I’m a child of the 80s, I’ll end this with the sage words of Sergeant Phil Esterhaus from Hill Street Blues: “Let's be careful out there.”
Enjoy the 4th everyone. I’m going to take a break from Substacking until Friday July 7.