Weekly Market Outlook
By Donn Goodman
March 13, 2023
Welcome readers to our Weekly Market Outlook. We thank you for “tuning in,” and of course, we appreciate all the comments we keep receiving. Keep them coming. Feel free to send them to me at DonnG@MarketGaugePro.com. Let’s jump right into the update:
There is a host of important issues pertaining to the Economy, the Markets and the major drivers, including technology and semiconductor stocks.
The Bad News for the Economy.
Given much of the good news surrounding positive earnings surprises that we have witnessed during this recent earnings season coupled with steady job growth, companies want to ensure their margins are intact and have begun to cut staff. We haven’t seen these type of job cuts since the pre-recession periods of the past.
Is it that these companies wish to keep their profits intact or is there a bigger pivot occurring in today’s industries due directly to AI and technological breakthroughs these company’s are experiencing?
More on the Job Cuts:
Job cuts at U.S. companies in February reached their highest level since 2009, according to the monthly layoff report from Challenger, Gray & Christmas.
“Businesses are aggressively slashing costs and embracing technological innovation, actions that are significantly reshaping staffing needs,” Andrew Challenger, a labor and workplace expert at Challenger, said in the report. See chart that follows below:
Employers primarily cited “restructuring” as the cause of the layoffs. An example of this can be seen in high profile tech layoffs at companies such as Google. The tech giant, and one of the vital components of the Magnificent 7 (more on this later), announced significant layoffs in January as part of their large-scale reshuffling, saying the company is shifting to “invest in our company’s biggest priorities”. A month earlier, the company launched its AI bot Gemini. We surmise that this new AI program is heavily powered by Nvidia semiconductor chips.
Other big tech companies such as Microsoft, Apple, Amazon and Meta have all announced cuts this year just as they look to ramp up their AI efforts.
Job cuts in tech are much lower than they were last year. In February of 2023, nearly one third of all job cuts came from tech companies. This year, other industries have begun to begin large job cuts. These industries, including manufacturing and energy, are incurring layoffs that are 1,000% more than were enacted during 2023. Below is a list of the industries and their projected job cuts for 2024:
This week, we also got testimony from Federal Reserve Chair Jerome Powell, who said that the Central Bank is getting close to the confidence level needed to start lowering rates. His comments reinforced the Fed’s new pivot from the chapter that began during the pandemic and was exacerbated by rising costs from Russia’s war on Ukraine.
Many investors had thought the Federal Reserve would start lowering rates this month, since the current inflation is around 3% and the 10-year bond yield is over 4%. We think the inflation challenge is not done yet, as the forecasts have changed for longer periods than 1 year ahead, and inflation expectations may still pose a long-term risk to the economy.
We think that this has kept the Fed in a more hawkish stance and that we will not see interest rate cuts until June or beyond. (we could be wrong). See chart below:
The Markets.
Earlier in the week, with the continued upward movement of technology stocks, it looked as if the S&P would close for the 17th positive week in 19 weeks. But such was not the case when the market turned down on Friday afternoon led by a selloff in the afternoon. See the 21-week chart on the S&P below.
Nvidia, which has been on a tear (along with other semiconductor stocks – more to follow on this), had a 10% move on Friday from peak to trough. See chart from Friday below:
However, all the major markets remain positive and healthy year-to-date. The strength of the returns since October 2023, has historically led to more gains going forward.
Use the links below to continue reading about:
- What happens when the Stock Market is up over 20% in 18 weeks?
- The long-term record of the S&P 500 since the Great Financial Crisis of 2008-2009?
- Sister Semiconductor: The Major Driver of the Markets!
- The longest streak for semiconductor stocks since August 1995
- What happens after this kind of streak?
- What investors are doing with Tech stocks now?
- The Magnificent 7 has become the Fabulous 4
- Gold is beginning to Shine!
- The Big View bullets
- Keith’s weekly video analysis
- And more!
The market’s price action and news flow can be confusing and intimidating, but investing in this environment doesn’t have to be. If you would like personal guidance and hands-on management of your assets with the assistance of tactical, risk-managed, strategies, please contact me at donn@mgamllc.com or Keith at keith@mgamllc.com.
