Weekly Economic Update: April 3, 2023

Presented by Nicholas Wealth Management

Stocks Overcome Eventful First Quarter:
Despite recent banking sector turmoil, additional Fed rate hikes, and greater market volatility, broad U.S. stock indices finished 2023’s first quarter with solid gains. The S&P 500 index returned 7.5%, its second straight positive quarter. Growth stocks led the market (Russell 1000 Growth index, +14.4%), keyed by a rebound in technology stocks, while value stock indices were limited by weakness in the financial and energy sectors (Russell 1000 Value index, +1.0%). Bonds also recorded positive returns in Q1 (Bloomberg U.S. Aggregate index, +3.0%), marking the second straight quarter both stocks and bonds posted simultaneous gains.

Downturn in Home Prices Persists:
Reflecting the impact of higher mortgage rates on the housing market, home prices continued to retreat in the early stages of 2023. The S&P CoreLogic Case-Shiller 20-City Composite Home Price Index fell 0.4% in January from the prior month, marking the seventh straight month that prices declined. Prior to seasonal adjustments, prices fell in 19 of the 20 cities in the index, with only Miami reporting an increase. Compared to the prior year, prices across the 20 cities were up only 2.5%, the smallest year-over-year increase since December 2019.

Consumer Sentiment Backtracks in March:
After hitting a one-year high in February, U.S. consumer sentiment fell in March for the first time in four months. The Index of Consumer Sentiment published by the University of Michigan registered 62.0 in March, down 8% from 67.0 in February. While March’s reading was 4% higher than a year ago, it remained well off the index’s 30-year average of 86.8. In a sign that consumers’ concerns about inflation are easing, the year-ahead inflation expectation of survey respondents fell from 4.1% in February to 3.6% in March, which is the lowest reading since April 2021.

Source: Gallagher Insurance, Risk Management and Consulting