Good morning,

Last week the stock market experienced slight declines overall. A shift of funds into blue-chip stocks enabled the Dow Jones Industrial Average to secure a minor increase, but other major indices faced losses due to the resurgence of growth concerns.

Following the unexpected announcement by OPEC+ of a 1.16 million barrels per day production cut commencing in May and lasting until year-end, market confidence waned at the beginning of the week. Consequently, oil prices surged by 6.4% to $80.70/bbl.

After the market had the chance to digest OPEC+’s unforeseen decision, growth worries spread and dictated price movements for the remainder of the week.

A series of underwhelming economic indicators, coupled with JPMorgan Chase CEO Jamie Dimon’s statement in his annual shareholder letter that the regional banking crisis persists and will have lasting impacts, fueled ongoing slowdown concerns.

Investors are grappling with the belief that reduced growth will result in further cuts to earnings estimates. Cyclical sectors suffered the most significant losses this week, while defensive-oriented sectors enjoyed notable gains.

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WHY AND WHEN THE FED INCREASE RATES

According to Morningstar and other market analysts, it appears that the Federal Reserve is expected to pause its rate hikes by the summer of 2023 and then begin cutting interest rates around the end of 2023.

Why? Analysts predict that the Fed will lower rates in response to lower inflation and recessionary conditions, including a marked rise in unemployment from Q4 2023 onwards.

As I have previously said, the Fed wants to see inflation in check and higher unemployment. Both have yet be “officially seen,” but will likely hit very hard in the coming months.

There is a third factor that no one is talking about… politics. Biden would most likely lose (Just like Trump and Carter) if he ran while the economy was in a recession. Many would tell you the Fed is not political, but I think most things are political today. If Biden runs, expect the Fed to feed the market as early as Q1 2024.

Have a great week!

Irving Wilkinson
Editor
AlphaBetaStock.com

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