Market Update: May 19, 2023

Welcome to the Weekly Market Update from Signature Wealth Management. I’m Brian Ransom, Research Director from Signature Wealth, and here’s what happened in the market this week.

 

For the last couple of months, the market has been in a tight, range-bound trading pattern with no clear direction of movement for bulls or bears. However, the market cap weighted index did just recently break out of that trading pattern as the bulls take the reigns from the bears for now.

In the news this week, long term treasury yields rise on higher growth expectations. The US continues to edge closer to a default with some progress being made on negotiations on the debt ceiling. And home prices fell significantly for the month of April as the housing market continues to pull back.

Returns this year have been pretty bifurcated in the stock market. The S&P 500, shown here in blue, is up a little less than 10% so far this year. Returns for the last month or so have been concentrated in the large cap tech space. The Nasdaq 100 as measured by the QQQ shown in purple, has pretty significant returns this year, greater than 25% as of market close on May 18. This index is weighted heavily to the largest of the technology firms. Semiconductors, shown in orange, have also produced high returns this year. Both the QQQ and semiconductors are closely tied with a major developing theme in the economy right now: artificial intelligence.

However, it’s not all roses for other parts of the stock market. The equal weighted S&P 500 and the Russell 2000 are significantly underperforming the S&P 500. The equal weighted index, shown in orange, is a more accurate measurement of every stock in the S&P 500. With the S&P up nearly 10%, the equal weighted index is barely positive YTD. This implies that only the largest of the stocks are driving the majority of the returns so far this year and there is, in fact, a lot of weakness underneath the hood. Small caps, as measured by the Russell 2000 shown in purple, have also been very weak indicating that the economy is not necessarily in a healthy spot right now.

In fact, of the 500 stocks in the S&P 500, 233 have a negative return year to date. This includes 100 stocks that have losses greater than 10% on the year. So despite the fact that the S&P 500 is showing a fairly healthy return so far this year, that’s not necessarily the case for every stock in the index.

This Weekly Market update is meant to be an enticing appetizer for market and economic insight. For a heartier serving, please check out our podcast, “Up and to the Right” on all your favorite podcasting apps. And for the full course meal, check out our website at signaturewmg.com. As always, don’t forget to smash that subscribe button!

Sources:

1.FactSet Research Systems. (n.d.). S&P 500 (Interactive Charts). Retrieved May 19, 2023, from FactSet Database.

2.FactSet Research Systems. (n.d.). SOXX, QQQ, & S&P 500 (Interactive Charts). Retrieved May 19, 2023, from FactSet Database.

3.FactSet Research Systems. (n.d.). RSP, Russell 2000, & S&P 500 (Interactive Charts). Retrieved May 19, 2023, from FactSet Database.

4.FactSet Research Systems. (n.d.). S&P 500 YTD returns (Screens). Retrieved May 19, 2023, from FactSet Database.

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