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100 days in – can markets still float higher?

What the beginning of the year might tell investors about how we’ll finish 2023.

Our Top Market Takeaways for May 25, 2023

MARKET UPDATE: Rolling, rolling, rolling on the river 

2023 has already seen a lot. But through all of the challenges and angst, markets are, for the most part, holding their ground.

Today marks the 100th trading day of the year. With that in mind, today’s note considers what the beginning of the year has taught us, and what that might suggest for how it’ll finish.

So, we’re 100 days in and…

…the debt limit dilemma still isn’t resolved.

Things are getting down to the wire, with just seven days until Secretary Janet Yellen’s estimated June 1st X-date. Given all that’s at stake, we continue to think a deal that raises or suspends the debt ceiling is the most likely path from here. Otherwise, a scenario that sees the government crash through the X-date but continue to make its debt payments (at the expense of more discretionary spending like education or transportation) would feel a lot like a government shutdown, while the worst case scenario of actual default (meaning the government never pays back its creditors) would be even more calamitous – neither have ever happened in the century that the debt ceiling has existed.

Both Democrats and Republicans have noted progress in negotiations this week, but there still seems to be a wide divide on several key issues heading into the long Memorial Day weekend. Rating agencies are also now kicking up some dust, with Fitch putting the U.S.’s AAA credit rating on its downgrade watchlist yesterday – a move reminiscent of 2011’s episode.

Yet, the media noise may be louder than the risk markets hear. Outside of Treasuries and credit default swaps (which offer insurance against the risk of potential of default), broad markets haven’t been too roiled.

…bank worries are coming and going, but the Fed still seems divided.

It’s been almost a month since the last bank failure (and 11 weeks since all the bank drama kicked off). Questions over further ripple effects and the future of the regional banking industry remain, but much of the discourse around bank runs and a crisis of confidence seems to have moved on. A sign of the times: While the S&P 500 is having its worst week since March, the KBW Bank Index is in the green (on top of its best week since October last week).

Rather, the balancing act for central bankers seems to be between preparing for the effects of tightening credit conditions and tackling still elevated inflation. The latest Fed meeting minutes, which offer a peek behind the curtain of the May policy meeting, suggested policymakers may be done hiking rates. Yet, rhetoric from Fed speakers over the last week has signaled that even if a pause comes in June, a few more hikes may be needed to once and for all claim victory against inflation. The one consistent message has been pushing back on rate cuts – and it seems to be working: Markets have priced out almost all of the cuts they were baking in for this year – just approximately 25 basis points today versus approximately 80 basis points only three weeks ago.


Either way, whether it takes a few more hikes or not, markets are still betting on the Fed getting things back in balance.

…Corporate America is doing just fine.

Q1 earnings season was far better than feared, even as it still showed a slowdown. Every sector but utilities bested profit expectations, and tech in particular blew it out of the water (look no further than NVIDIA’s stellar report this morning). Economists and Wall Street (us included) have been chattering about a potential recession for the last year – that’s given Corporate America ample time to prepare, taking on cost cuts and refocusing to protect profits.

A recession still looks probable to us, but companies seem to be either less worried about it, or at least feel better prepared. While a few S&P 500 companies are still due to report in the coming days, those throwing out the “recession” buzzword have now declined for three straight quarters.

…stocks are higher thanks to it.

It might be a tough week with all the debt ceiling drama, but the S&P 500 is holding onto a +8% year-to-date gain. While history is never a guarantee of future returns, that big of a gain at this point in the year tends to suggest there’s more green ahead. When the index has been +8% or more higher on Day 100 in the past (going back to 1950), the full year return has been positive in every instance, up on average +24%.

…and it’s not just big tech, either.

To be sure, big tech has been a powerhouse. But the strength is broader than that. Consumer and travel names like Royal Caribbean (+56%), Uber (+53%) and Booking (+30%) are some of the brightest spots. Semiconductors are up over +20%. Homebuilders are up some +16% so far this year. 17 countries are also outperforming the U.S. 

To that end, Michael Cembalest, our Chairman of Market & Investment Strategy, has long called for barbelling an overweight to the U.S. and Emerging Markets and an underweight to Europe and Japan. While that’s proved fruitful in the last decade or so, the tide’s turned this year. With Europe besting the U.S. by almost 3% year-to-date for dollar investors, and Japan hovering near three decade highs, he’s retiring the barbell, at least for now

In all, while the slate of known unknowns seems full, the key when it comes to investing is balance – and multi-asset portfolios are designed to provide just that.

Your J.P. Morgan team is here to help.



All market and economic data as of May 25, 2023 and sourced from Bloomberg and FactSet unless otherwise stated.

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

The Bloomberg Eco Surprise Index shows the degree to which economic analysts under- or over-estimate the trends in the business cycle. The surprise element is defined as the percentage difference between analyst forecasts and the published value of economic data releases.

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