March Market Recap

How much impact does “desire” have on a particular outcome?

This thought came to mind while staring out the window the morning of April 1, hours after Mother Nature’s April Fools joke had dropped 8 inches of snow from Minneapolis skies. If we really want the snow in that driveway to melt faster, will it make any difference? Before you answer too quickly, we’ll point out that temperatures did reach 50 degrees (and sunny!) just 24 hours later.

If investors really want the stock market to go up… For the bear market to be over… For 2023 to be different than 2022… Will it have any impact?

It sure felt like resilience and desire played a part in equity returns last month. Despite a modern-day bank run that left two banks insolvent and several others reaching for regulatory safety nets, all three major equity benchmarks were positive in March.

As you might expect, Financials (-9.7%) suffered heavy losses last month with the silver lining being those losses appear mostly contained. No other sector in the S&P 500 lost more than 2%. Seven of the 11 sectors delivered gains. Technology (+10.9%) and Communication Services (+10.4%) were the best performers in March.

Benchmark Returns: March 2023 | YTD 2023

Dow Jones
S&P 500
+1.89% | +0.38%
+3.51% | +7.03%
+6.69% | +16.77%

Even before news broke suggesting trouble in the banking sector, markets were off to a rocky start last month. On March 7, Federal Reserve Chair Jerome Powell suggested in testimony to Congress that Fed policy would remain restrictive given strong economic data.

“The ultimate level of interest rates is likely to be higher than previously anticipated,” Powell said. “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.” The Dow sold off 575 points (-1.7%) following those comments, while two-year US Treasury yields rose above 5% for the first time since 2007.

Three days later on Friday March 10, California regulators shut down Silicon Valley Bank igniting panic in the retail banking sector (and in small cap stocks as a whole). The VIX Volatility Index surged nearly 30%. The S&P 500 closed at its lowest point since early January.

On March 12, the US government announced measures to protect depositors with money at retail banks, which thankfully marked the trough for stocks (and perhaps “peak desire” for a rebound). When markets opened on March 13, the major benchmarks stabilized, though bond yields did plummet as part of a flight to quality. The two-year US Treasury yield sank 0.62%, its largest one-day drop since October 20, 1987 (the day after Black Monday).

From March 14 through month-end, the S&P 500 gained 6.6%. As April began, the index was nearing the midway point (4,155) between all-time high (Jan. 2022) and bear-market low (Oct. 2022).

The Fed did raise interest rates by 0.25% on March 22. The latest hike is smaller than what had been forecast early last month. The sudden weakness in retail banking almost certainly caused the Fed to avoid a larger increase.

The most recent readings show inflation is receding at a pace in line with expectations. The Consumer Price Index (CPI) showed a 6% increase year-over-year (down from 6.4% a month earlier). The Fed’s preferred inflation measurement, the Personal Consumption Expenditures index (PCE) is up 4.6% year-over-year.

The jobs report again exceeded consensus expectations. The US economy added more than 300,000 jobs in February (this following 500,000 new jobs in January). Wages rose only 0.2% from a month earlier.

Small-cap stocks were a major underperformer last month. The Russell 2000 fell 5% in March. International equities booked better returns. Non-US Developed equities rose 3.1%. Emerging Markets gained 3.2%.

Consumer sentiment (as reported by the University of Michigan) worsened in March for the first time in four months. And that was before bank headlines elevated our national blood pressure. A reminder that increased pessimism is often a positive indicator for stocks.

Gold prices rose 8% in March. Crude oil fell 3%.

Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.