This week’s stock market performance was relatively stable, with little price movement either up or down. The S&P 500 closed at 4,133, only slightly lower than the previous Friday’s close of 4,137. 

Investors were waiting for many company earnings reports before jumping into the markets. Negative reports such as Tesla’s (TSLA) weak Q1 earnings caused it to drop nearly 10% on Thursday. However, Procter & Gamble (PG) saw a 3.5% increase on Friday thanks to its positive fiscal Q3 results and confirmation of its FY23 EPS guidance. 

Fed rate hikes, the debt ceiling battle, and recession fears are three things that will drive the market’s direction in the following months.

FED RATE HIKES

The market is still very tied to the Fed and interest rate movements. The Federal Reserve has said continuously that it intends to increase rates in the near future, but market participants are betting that the Fed’s benchmark will hold steady in its 4.75-5 percent target range. 

We do know that the Fed is anticipated to raise rates by a quarter of a percentage point at its May 2-3 meeting, which would take its benchmark overnight interest rate to the 5.00%-5.25% range. This increase would align with the Fed policymakers’ projections in December and March. After this rate hike, the Fed is likely to hold rates steady for the rest of 2023, according to a Reuters poll of economists.

BUDGET BATTLE

The looming budget battle in Congress could affect the stock market but is not a serious threat of default. Nevertheless, The stock market tends to dislike uncertainty, and budget battles can lead to increased volatility, as seen in 2022. In the past, the U.S. debt limit has caused ripple effects throughout the economy and the stock market.

RECESSION FEARS

I agree that the US is in or heading into a recession, but the Fed will come to the rescue. Here are three indicators to look at:

1. A commercial real estate crash is underway, and investment banks like Morgan Stanley and Goldman Sachs are already discussing it.
2. Layoffs are happening. First, we saw tech shed workers by the thousands; not other companies like Ernst & Young are laying off.
3. Bankruptcy filings are up. Epiq Bankruptcy reports that filings were up 17% in March, and commercial filings are up 79%.

DON’T LET FEAR RUN YOU

The news media and other publications will likely use “recession fears” to create more “clicks” and drive hysteria. 

However, I have learned that some of my best calls were against the crowd. This why I believe the Fed will come to the rescue because of one person – BIDEN.

Recent one-term Presidents like Trump, Bush & Carter all got the boot when the economy tanked in their first term.

Given the political environment that we are in, the Fed will move in. Do I agree with it?

HECK NO, but I am a capitalist and looking to make money, not a political statement.

CRISIS EQUALS OPPORTUNITIES

Given the potential for “blood in the streets.” There are many opportunities for people to invest now and in the near future.

Gold: It rose over 2000% during the high inflation periods under Carter; I like Gold as a long-term hedge against inflation and the dollar losing value. Get your free gold investment guide here.

Real Estate: Real estate increased over 300% from 1970 to 1982, so it will likely continue to climb long term if there isn’t a big bubble bust. Waiting for the right deal is critical, and November-January will probably be a market low.

Stocks: The stock market will continue to produce some gems, with you knowing where to look. An example is the defense sector, which is up over 8%. There could be some good deals. 

CALENDAR & MOVERS

The upcoming week is packed with earnings reports featuring prominent companies from all sectors. Approximately 35% of firms in the S&P 500 Index are set to release their financial figures next week.

In the week ahead, noteworthy economic releases include:

• Consumer confidence and new home sales on April 25.
• Durable goods orders on April 26.
• The closely-monitored employment cost index on April 28.

Federal Reserve members will make appearances on Monday, before the commencement of the blackout period preceding the FOMC meeting scheduled for May 2-3.

BONDS

A study conducted by Bank of America reveals that asset managers’ primary concern is now the risk of a credit crunch and a potential recession, mainly due to the crisis in US regional banks. Pursuing a restrictive (“hawkish”) monetary policy to contain inflation has taken a backseat. Consequently, bonds constitute 9% of asset allocations, the highest level since 2009.

The US 10-year yield also appears uncertain. After climbing above 3.35%, it failed to surpass its 144-day moving average, which has risen since 2021 and now sits below 3.70%. It is worth noting that since last year, yields have moved inversely to the S&P 500, with rate increases leading to weakness in the equity market and vice versa. A continued rise could further impact the US stock market’s flagship index performance.

On the other hand, a sharp drop in bonds might be perceived by savvy investors as a sign of an impending recession. The S&P 500’s path will likely resemble an obstacle course rather than a calm, steady river. The story continues.

COMMODITIES

OIL & ENERGY

This week, oil prices shifted into reverse, entering a sideways movement phase that seems reasonable given the soaring prices from mid-March to mid-April, when Brent crude oil climbed from $72 to $87. The latest data from the US Energy Agency has impacted the trend, as the EIA highlights waning gasoline demand—an excellent indicator of the ongoing economic slowdown in the US. Consequently, US WTI and European Brent crude prices have dropped this week to $77.30 and $80.80, respectively. There’s no significant change in European natural gas, with the Rotterdam TTF trading at around EUR 41/MWh.

PRECIOUS METALS & GOLD

The industrial metals sector has generally declined this week, pressured by a strong dollar and mixed economic statistics regarding China’s industrial production. Copper is trading at $8,875 per tonne on the LME. Some mining companies, like Brazilian giant Vale, have released their quarterly accounts, reporting a 5.8% YoY increase in iron ore production in Q1. Rio Tinto revealed an 11% YoY jump in iron ore production for the same period. Additionally, Antofagasta reported a rise in mining production, with copper production up by around 5%. In precious metals, Gold is trading at about $2,000 per ounce.

CRYPTOCURRENCY

Bitcoin has lost all its gains from the previous week, falling by 6.8% since Monday and trading around $28,200 at the time of writing. With US regulators’ stance on cryptocurrencies still being determined, market players need more visibility. In contrast, the European Parliament has passed the MiCA regulation, offering more clarity and a much-needed framework for companies in the industry looking to expand in Europe.