May 3, 2023
The Market Health Indicator (MHI) measures market health on a scale of 0 – 100, analyzing various market segments such as economics, technicals, and volatility. Higher scores indicate healthier market conditions.
Regulators took possession of First Republic Bank and sold most of its assets to JPMorgan Chase. JPMorgan will also absorb all of the bank’s deposits.
This is the third American bank failure since March as specific regional banks became more susceptible to major withdrawals.
First Republic wasn’t as ‘niche’ as failed Silicon Valley Bank or Signature Bank, but it did have a narrow exposure to wealthier clients. Two-thirds of accounts at the bank had balances above $250k (above the FDIC threshold).
Customers withdrew over $100 billion from First Republic in Q1, a 40% reduction in deposits.
While depositors have been protected from the recent banking jitters, the biggest banks are getting bigger while smaller banks are finding it more difficult to do business.
Following a bumpy March, the S&P 500 traded in a narrow range of just 3% throughout the entire month of April. For reference, there were 12 instances last year where the Index closed up/down more than 3% in a single day.
Despite ongoing market and economic uncertainties, volatility dropped to its lowest level since mid-2021 as the CBOE Volatility Index (VIX) closed the month at 15.78. This is well below the recent high of 26.52 during the onset of the banking turmoil last month. As volatility faded, major US stock indices skewed positive with gains of 2.48% for the Dow Jones Industrial Average, 1.46% for the S&P 500, and 0.49% for the Nasdaq 100. However, smaller companies struggled with the Russell 2000 posting a loss of 1.86%.
International markets were mixed for the month with a gain of 2.63% for developed international stocks and a slight loss of 0.40% for emerging market stocks. The ongoing tensions between Russia and Ukraine, along with lackluster growth in China, have hindered emerging countries while developed countries have continued to find their footing.
While there was some fluctuation in interest rates during the month, the 10-year Treasury yield fell only slightly from 3.48% to 3.44%, resulting in a gain of 0.61% for the US aggregate bond market. This was the third positive month for bonds so far this year, already matching the total number of positive months from 2022. With the Fed seemingly near the end of its rate hiking cycle (markets are pricing in one more hike in May, with a potential pause in June), bonds have stabilized in recent months.
Overall, 2023 has been broadly positive for most asset classes so far, which has been a nice change of pace from last year. Still, there remains a level of uncertainty in markets and the economy. Earnings have been coming in better than expected and the labor market remains robust, but GDP growth is slowing and inflation (while improving) is lingering. With mixed signals abound, it’s important to maintain patience and have a plan and investment strategy in place to help cut through the noise.
Just 26 days after its April 5 release, The Super Mario Bros Movie reached $1 billion at the global box office. This makes it just the 10th animated film to reach the lofty benchmark.
While the immediate success puts Mario in rare company, it highlights a trend that’s popped up in Hollywood – game adaptations. Movies based on games, both digital and analog, have surged in popularity in recent years.
Video games boomed in the 80’s and 90’s when millennials were growing up, so these movies are benefiting from a nostalgia factor.
Covid also provided a boost to the gaming industry as a whole, as people looked for new hobbies to fill their time.
Companies seem to be gearing up to expand popular games into household franchises (think movies, tv shows, toys, and other merchandise).
Coming off three consecutive monthly declines, stocks soared higher in November on the back of growing rate pause expectations.
October was filled with more tricks than treats as markets continued to slump.
Inflation increased for a second straight month, with CPI rising from 3.2% to 3.7%, above expectations of 3.6%.
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