Dear Client, Partner, Prospective Client:
That’s more like it! Yes, things are always sunnier when the markets are going up, right? After a dismal and tough-to-stomach 2022, things are going well again in the markets in the first quarter of 2023. The DJIA, S&P 500 and the Nasdaq are all up YTD, and if earnings season (which JP Morgan kicked off today with a pleasant surprise) doesn’t disappoint too much, we may be in store for more gains throughout the year. We talked about annual gains, in our first quarter letter of 7-12% for the year and we are already there, at the lower end of that range, with the S&P 500 up 7.03% as of the end of March. Much of these gains have been the Big Tech and travel recovery with the likes of MSFT, AMZN, APPL and BKNG leading the way. Retail is still lagging well behind with inventory issues, but NKE and LULU are trying their best to drag the rest of the industry out of their winter doldrums.
March unemployment numbers were steady at 3.5%. Non-farm payroll employment rose by 236,000 and employment is trending upwards in leisure and hospitality. The economy is humming along even with the staggering inflation starting to come down.
Bank failures with Silicon Valley Bank and Signature Bank caused some turmoil several weeks back. It’s important to recognize that these failures were a small part of a bigger ecosystem. The head of the country’s largest bank, Jamie Dimon said, “the current crisis involves far fewer financial players and fewer issues that need to be resolved than in 2008, when $1 trillion worth of dodgy mortgages threatened to bring down the entire financial system.” So as much as the media talked about these issues and tried to say there were going to be bank runs across the country, it didn’t quite materialize. There needs to be some changes within many of the smaller regional banks with regulation, management of rising interest rates and reserve requirements, but overall, this sector is still financially sound.
Lastly, is the U.S. dollar declining? It has over the last six months, but it is also near it’s 10-year high with the 10 countries’ currencies we trade with the most often. A weakening dollar means that imports become more expensive, but exports are more attractive to countries outside of the U.S. So, it goes both ways on how much this impacts the U.S. This also means that exchange rate volatility will remain elevated. I hope all of you here in the Midwest enjoyed this one more April snowstorm from this never-ending winter…. after several days of temperatures in the 80’s. Only in the Midwest, right!
Sincerely,
J.B. L’Esperance, ChFC
If you have questions about our strategies or would like to open an account with Barking Sands Capital, please give us a call at 952.500.8854 or 248.687.1400 or email us at jb@barkingsandscapital.com