Investment Commentary – May 16, 2023
Year to Date Market Indices as of March 16, 2023

• Dow 33,012 (-0.41%)
• S&P 4,109 (7.04%)
• NASDAQ 12,343 (17.93%)
• OIL $70.53 (-12.40%)
• Barclay Bond Aggregate (1.98%)
• Gold $1,993 (8.91%)

J.P. Morgan Market Update

The end of the 1Q23 earnings season is approaching, and the results continue to look better than expected.

Profits The end of the 1Q23 earnings season is approaching, and results continue to look better than expected. With 462 companies having reported (90.8% of market cap), our current estimate for 1Q23 operating earnings per share is $53.42. If realized, this would represent y/y growth of 8.2% and q/q growth of 6.1%. So far, 69% of companies have beaten earnings expectations, while 66% have beaten revenue expectations. Importantly, profit margins bounced in 1Q23, with our current estimate tracking 12%.

Real GDP grew by a 1.1% annualized rate in 1Q23, a sharp deceleration compared to last quarter’s 2.6% pace. Consumption and government spending looked strong, growing at annualized rates of 3.7% and 4.7%, respectively. However, most of the consumption gains can be attributed to a strong January. These gains were partially offset by declines in private inventories and residential fixed investment. In particular, equipment spending fell sharply, indicating a slowdown in business investment spending. Looking ahead, normalizing inventory levels should support growth, but a strained consumer, tighter lending conditions and weaker business spending remain headwinds in the coming months.

Market-moving news

While the latest week’s decline in crude oil prices was modest, it marked the fourth negative week in a row. U.S. crude was trading around $70 per barrel on Friday, down from a recent peak of more than $83 on April 12. At the end of 2022, oil was trading around $80.

Bond stability

As with the modest moves seen in the U.S. stock market recently, volatility in the government bond market has also eased relative to the big moves seen in early March. Since then, the 10-year U.S. Treasury bond yield has moved in a narrow range of as high as 3.60% to as low as 3.29%, with Friday’s yield at around 3.46%. In early March, it peaked at 4.07%.

Earnings scorecard

With 92% of S&P 500 companies having reported first-quarter results as of Friday, the proportion of S&P 500 companies that have beaten analysts’ earnings expectations remained slightly higher than usual. So far, 78% of companies have exceeded net income expectations, topping the 10-year average of 73%, according to FactSet.

The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments. (Market Indices) (Around the Web & Upcoming Events) (YTD Performance Chart)