March Recap and April Outlook
The recent ups and downs in the stock market might have seemed unphased by the news of bank failures and the forced sale of a major Swiss bank. We briefly shifted our attention away from important economic factors like consumer sentiment, inflation, and interest rate hikes, but quickly returned to discussing them.
There's a connection between these events. While bank failures are not a cause for celebration, they do have an impact on the economy. As banks reduce lending, it helps the Federal Reserve control inflation. However, this also increases the risk of a recession because the Fed has less flexibility to respond with rate hikes.
As a result, the Fed may decide to pause on raising interest rates sooner than expected. For now, they made a cautious move by increasing rates by 0.25% at their March meeting.
In simpler terms, the stock market seemed unaffected by the bank troubles, but we can't ignore the potential consequences for inflation and the overall economy. The Fed is trying to balance these factors by adjusting interest rates, and we'll need to keep an eye on how things unfold in the coming months.
Equity Markets in March
The S&P 500 was up 3.51%
The Dow Jones Industrial Average rose 1.89%
The S&P Mid-Cap 400 returned -3.41%
The S&P Small-Cap 600 returned -5.38%
Source: (S&P. All performance as of March 31, 2023)
After taking a beating throughout the rate hikes of the last year, the poster children for growth stocks – Information Technology – had a gain of 10.93% which added 2.97% to the S&P 500 Index’s return and helped overcome Financials’ 9.55% drop for the sector and 1.13% cost to the index. The first quarter return was 7.50% for the overall index.
Bond Markets
The 10-year U.S. Treasury ended the month at a yield of 3.48%, a drop from February’s 3.98 and almost even with the end of January. The 30-year U.S. Treasury ended February at 3.92%, down from 3.66% last month. The Bloomberg U.S. Aggregate Bond Index ended March with a return of 2.53% and is positive for the quarter at 2.96%. The equity and bond markets remain positively correlated.
The Smart Investor
Tax season can be exhausting even for people who aren’t CPAs. But before you put those tax thoughts away for another year, take a minute to see if there’s anything you can do differently for next year.
Good housekeeping chores include:
Are you taking advantage of tax-efficient savings in HSAs, FSAs, and retirement plans?
How about savings for kids’ college? If your state offers a tax break for a 529 plan – even if you haven’t been saving for years, you may be able to fund one and then take the money out in the same year to pay college costs and avail yourself of the tax break
Are you setting up lower taxes in retirement by converting to a Roth account?
Are you taking advantage of the spousal IRA provisions, if only one spouse is working?
How about charitable giving? Getting a plan in place now can eliminate year-end scrambles
Are you planning any asset sales this year? How will you structure them?
Is your estate plan in place? Have you set up a trust?
The goal for tax planning isn’t to lower your taxes in any one year – it’s to plan ahead and pay as little in taxes as possible over the course of your working life and your retirement and then pass on as much as possible to your loved ones.
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The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax or financial advice. Please consult a legal, tax or financial professional for information specific to your individual situation.
This content not reviewed by FINRA
