Update for Carlson Financial client accounts for April 2023

Written by: Dan Moylan, Chief Investment Officer, on May 8, 2023

We saw the market continue to gain in April, albeit minimal, with the Nasdaq barely green, up .04%.  The Dow was up 2.48% and the S&P 1.46%.  These gains aren’t what we have been accustomed to this year, the Nasdaq in March alone was up 7.40%, but with the real and imagined headwinds in April, these indicators being up at all is an accomplishment.  The continued real headwind is the interest rate increases the market has been absorbing as the Fed uses this tool to slow growth.  The management of this process by the Fed is debated non-stop and plays out in the market daily depending on the sentiment for the day.  The numbers indicate rising interest has slowed growth based on GDP and most companies have felt the impact of slowing growth on their bottom lines. As hoped for, inflation continues to drop, and has given support to the stock market each time we get a tick down, the market assumes that means interest rates will pause.  This outcome was supported when the rate was raised in the May FOMC meeting by .25% to a target of 5-5.25% but changed a note that led analysts to believe there will be a pause in June.  According to the CME Group, markets are currently pricing in an 82.7% chance the Fed will pause rate hikes in June per the Wall Street Journal.  Other headwinds include, the debt ceiling stalemate, inflation has dropped but is no where near the target of 2%, and the banking system problems.  Fed Chair Powell indicated the Fed thinks the banking system is stronger than in March.  The next meeting is June 13&14, we will see what the data says at that point, but will have more volatility for the next 6 weeks as the data gets released.   

We made one major change to your accounts in April.  We sold Palantir (PLTR) and bought back MSFT or AMD with the proceeds.  We downgraded PLTR to a sell because of some issues with the current leadership of the company that we feel will negatively impact growth.  Taking advantage of continued optimism in both MSFT and AMD provides much more stability and growth opportunities in your accounts. Both companies had upbeat earnings reports for their last quarter recently, which was followed by a decent rally in share prices.  Currently we don’t have any major changes for May, but that can easily change when we find good values to buy.

Have a great May. 

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