4 Key Lessons Learned From Q1 In The Stock Market…


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4 Key Lessons Learned From Q1 in the Stock Market…

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While I think the bulls made great strides in the first quarter, I think it’s too early to say we’re completely out of the woods. So I thought this would be the perfect time to look back at the first quarter of 2023 and analyze the factors driving the S&500 and what we can learn from it to outperform it in the coming weeks and months. Read more….

(Please enjoy this updated version of my weekly comment originally posted April 7th.th2023 in POWR Stocks Under $10 Newsletter).


The first quarter of 2023 is officially counted. And dude, that was weird. Pretty much the only thing anyone seems to have correctly predicted is that it was LOADED with volatility.

I went back and read a number of reports from the beginning of the year to see exactly what experts are telling us to expect in the first quarter and beyond.

What was predicted at the beginning of the year


1) Recession occurs in the first half of the year. Whether it will be a soft “soft landing” or a classic recession that will affect all sectors of the economy was discussed, but almost all experts predicted that we would have some kind of recession, most likely in the first half of the year. .

2) Sell, sell, sell. Nearly every voice in the room was bearish in the run-up to 2023, with most forecasts looking for another downturn in the first quarter. Many thought we would test October 2022 lows or even set new lows early in the year before moving higher in the second half.

3) Seth, heeeeeeeee! (I know this is an inappropriate joke, but I can crack it because I’m from Texas and football is one of our top three exports.) We’ve seen an unprecedented rate of rate hikes in 2022, and many pundits thought it was will happen. continue consistently through 2023… or as long as inflation remains high. Interestingly, many individual investors continued to trade the market as if the Fed would pause or even cut in March.

4) The company’s revenue for the year is falling. It was also part of the recession equation. However, the consensus analysts’ forecast for the S&P 500 (SPY) net margin was 12.3%, higher than the estimated net margin of 12% for 2022. This meant that many pundits were predicting a downward revision, which would put more pressure on the stock, leading to stronger selling.


5) Growth stocks, tech stocks and cryptocurrencies are losing. These were some of the worst groups in 2022, and since most experts expected the same from the Fed, it was logical that these groups would continue to lose. Many experts also suggested staying away from retail and leisure companies as they are sensitive to the business cycle.

6) Quality companies are a safe buy. We have seen a number of market strategists recommend buying quality companies because they are the most likely to survive (and potentially do well) in a recession. In addition, companies with large debts on their books are likely to falter as economic conditions worsen.

7) Technology and small cap stocks bounce back after bottoming out (probably later fall or early 2024). While many analysts agreed that tech companies and small capitalists will perform poorly in the first six to nine months of the year, many agreed that the projected slowdown will set the stage for a strong recovery.

Wow. We were VERY bearish at the end of 2022. Personally, my biggest prediction for the year is that the Federal Reserve will continue to be an important market driver, for better or worse. And that we will continue to see bulls and bears fighting over the ~secret special meaning~ of every word from Powell’s mouth.


What we actually saw in the first quarter

1) Buy, buy, buy! To the surprise of many investors, the two major indices rose significantly in the first quarter. S&P 500 (SPY) ended the first quarter up 7%, while the Nasdaq rose 20.5%. The Dow Jones Industrial Average, which is comprised of those major high-quality stocks that analysts have recommended, performed the worst, advancing just 0.4%.

2) Growth stocks, technology and cryptocurrencies were the clear winners. Even though many analysts say these are exactly the companies to avoid, they were the best in the first quarter. The top five returns for the first quarter were…

FSLY (small cap cloud service provider) +116.8%
COIN (cryptocurrency exchange operator) +90.9%
NVDA (megacapacitance semiconductor) +90.1%
META (mega-cap technology conglomerate, also known as Facebook) +76.1%
EVGO (Small Cap Electric Vehicle Charging Stations) +74.3%

Much of this high gain is likely due to far-sighted investors focusing on a pause in rate hikes (which will benefit tech, growth and risk stocks) COMBINED with the fact that many stocks in this category are selling strongly in 2022 , so they were broken to begin with.

3) The Fed… didn’t make things easy. First they seemed to go dovish, then hawkish again, and then dovish again as the central bank decided to allow data lead the way. There is nothing fundamentally wrong with this strategy; however, it allows the Fed to act like it’s going to do one thing without actually committing itself to anything. And that’s how we have investors fighting over whether we’re going to have multiple rate hikes over the next nine months… or rate cuts. In short, Powell’s “agility” is responsible for the high volatility in the market. So far in 2023, we have had two increases of 25 basis points, with a third expected in May.

4) The Fed… busted several banks. After nine consecutive increases, we saw the collapse of two major banks on the weekend of March 10 due to unrealized losses on their bond portfolios and liquidity problems. This posed two problems for Powell and other members of the Federal Reserve: to curb chronically high inflation and to strengthen the banking system. In a sense, the banking crisis should do some of the Fed’s work for them; if banks become more choosy about who they lend to, it could be an additional anchor for the economy.

What’s next?

Right now, it seems that neither of the two analysts completely agrees on anything, but here are some important predictions for the rest of the year…

1) Another Fed raise in May… and then cut at the end of the year. This is based on the Fed’s interest rate target of around 5.1%. We are currently at around 4.9%, so another 25 bps increase will bring us to the target rate. However, Powell continues to make it clear that they are not married at this level, and we may see more rises (or pauses or even cuts) based on what the data shows.

2) Credit crunch due to bank repercussions. One of the reasons the Fed only raised rates by 25 basis points last March (instead of the 50 basis points that everyone originally expected) was because the banks were going to take on some of the hard work. Experts agree that after the banking crisis, most banks will begin to limit the circle of people they lend to, which will further hinder access to loans. Like raising rates, this will help slow the economy and reduce inflation.

3) Get ready for some kind of recession. Depending on who you’re talking to, it could just be a technical recession where growth is shrinking, but we don’t feel the pain as deeply as in past recessions… or it could be a hard landing. While the labor market remained strong, manufacturing activity declined and the housing market softened significantly. The yield curve has also flipped, with the New York Fed’s recession model predicting a 54.5% chance of a recession in the US over the next 12 months.

4) Higher quality companies will be rewarded. While many experts say a recession looks imminent at this stage, investors need not be sidelined. Take, for example, this first quarter. Anyone who waited to put their money into the job missed out on a profit, even though the outlook looked bearish at the start of the year.

It will be interesting (dare I say fun?) to look back at these forecasts in another three months and see how things are going. What are your predictions for this year?

Are you buying quality or risking your portfolio? Do you think we will eventually see additional raises, or are you one of the many who are expecting cuts at the end of this year? I’m always glad to see what’s on your mind.

Happy trading!

What to do next?

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All the best!

Meredith Margrave
Chief Growth Strategist, StockNews
POWR Stocks Under $10 Newsletter Editor

Shares of SPY closed Friday at $409.19, up $1.59 (+0.39%). Since the start of the year, the SPY has gained 7.41% compared to the benchmark S&P 500’s % gain over the same period.

About the author: Meredith Margrave


Meredith Margrave has been a renowned financial expert and market commentator for the past two decades. She is currently the editor of the magazine Power growth And POWR promotions up to $10 newsletters. Learn more about Meredith’s past, as well as links to her latest articles.


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