The first day of trading of 2023 was similar to 2022 trading…the under performance of the NASDAQ continued as two widely owned and followed technology companies disappointed.

TSLA fell about 12% as it announced its fourth quarter deliveries missed estimates despite the firm offering incentives in important markets. APPL dropped over mounting fears about iPhone supplies and demand.

As widely discussed, the S & P 500 has fallen for two straight years on just four occasions since 1928. Bloomberg writes however the second-year drop is greater than the first year.

The outlook for the upcoming year is varied however 71% of firms surveyed by Bloomberg expect equities to rise in 2023. Moreover, the survey indicates the Fed may “peak out” in March and then switch into rate cutting mode by the end of 2023. Inflation is expected to decline to 3% by year’s end.

The Federal Reserve on the other hand is forecasting a year end inflation rate of 5% and a pivot “sometime mid to late 2024.”

Many recessions have been forecasted but there has only been 13 post WWII recession, none of which had been predicted. Bloomberg writes 100% of firms surveyed are forecasting a recession sometime in 2023.

To write the incredible obvious, market direction will be dictated by interest rates and earnings, both of which are extremely opaque.

Speaking of interest rates and monetary policy, the primary determinant of today’s policy decision is jobs. Today the JOLTS Job Openings is announced. Tomorrow is the release of the private sector ADP Employment survey and Friday the BLS Employment report. These data points can have a significant impact upon outlook.

Also released today are the Minutes from last month’s FOMC meeting. Little new is expected to be learned however at times the Minutes have contained some surprises.

Speaking of potential shocks, the Atlanta Fed’s GDPNow 4Q economic tracker was just revised up to 3.91%. This is ahead of the recently passed $1.7 trillion spending package. If one adds in the expected robust labor market, the strong economy is a significant headwind for anyone expecting a dovish Fed.

For what it is worth department, AAPL’s slide yesterday lost its position of the only remaining company with a capitalization of $2 trillion or more. Bloomberg writes that it is now worth $1.99 trillion, down from $3 trillion about 13 months ago.

The four largest technology and internet companies have lost almost $3.7 trillion in market value since November 2021.  AMZN and GOOG both have declined in value of $1 trillion.

Bloomberg further comments there are only four companies that are now worth more than $1 trillion; MSFT, GOOG, AAPL and Aramco.

What will happen today?

Last night the foreign markets were up. London was up 0.61%, Paris up 1.74% and Frankfurt up 1.57%. China was up 0.22%, Japan down 1.45% and Hang Seng up 3.22%.

Dow and NASDAQ futures are up 0.30% and 0.70%, respectively on favorable news reports from China and rate optimism. The 10-year is up 16/32 to yield 3.68%.


The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.