What will the Ides of March Bring?
January’s strong start for equities was met with a downbeat February. The S&P 500 was off 2.44% for the month with the Dow Jones Industrials Average falling 3.94%. Equity markets struggled to maintain gains as interest rates continued to rise and inflation data remains stubbornly elevated. Earnings season resulted in lackluster results for the fourth quarter with the guidance across many industries pointing to a more cautious outlook for 2023.
We don’t think there is anything magical about March that will shift the market in one direction or another. The Federal Reserve is likely still going to raise interest rates, the geopolitical situation remains tenuous, and let’s not forget the looming problem of the debt ceiling which should culminate to a head in June. Despite the decline, stocks still trade very close to their 10-year average on a price earnings ratio. According to FactSet, the S&P 500 is valued at a price earnings multiple of 17.7, which is just slightly above the 10-year average of 17.2.
It’s important to put the rough patch of the markets in perspective. The 3-year total return on the S&P is still 12.15% annualized and the 10-year annualized return is 12.25%. Stocks have had a nice run the past decade and last year’s decline and the sideways market so far in 2023 may be more the norm for the coming year.
S&P TOTAL RETURNS, ANNUALIZED
|S&P 500||S&P MidCap 400||S&P SmallCap 600|
In March, we would pay attention to the yield on the 10-year treasury bond as that has been the key to understanding moves in the equity market. Additionally, the Consumer Price Index data and jobs report will be the key economic releases this month. March brings in the madness of college basketball tournaments and hints of spring. The ides of March is the 74th day of the roman calendar, March 15. It is also known as the day Julius Caesar met his fate and a date for settling all debts. Our countries debt issues have been pushed out a few more months and despite our world having its share of Brutus and Cassius characters disrupting the geopolitical stage, we are hopeful for a more sanguine month in the markets.
Source: S&P, FactSet