GPS: April 2023

Stocks rallied in March despite the failures of Silicon Valley Bank and Signature Bank, as market participants priced in a prompt end to rate hikes by the Federal Reserve (Fed). The S&P 500 gained 3.7% for the month, led by big gains in the technology sector. The growth-oriented Nasdaq benefited from the tech strength, rallying 6.8%, while the Dow Jones Industrial lagged with a 2.1% gain.

Core bonds, as measured by the Bloomberg Aggregate Bond Index, were up 2.5% during the month, as investors flocked to safe-haven assets.

Treasury yields were lower in March as markets are pricing in an end to the Fed rate hikes.

The Strategic and Tactical Asset Allocation Committee (STAAC) maintained its year-end S&P 500 fair value target of 4,300-4,400, based on a price-toearnings ratio of 18 and 2024 S&P 500 earnings per share forecast of $240. In addition to the changes noted on this page, the Committee also slightly reduced its value overweight.

GPS: March 2023

Stocks gave back some of their January gains in February as market participants priced in more rate hikes by the Federal Reserve (Fed) in

response to a series of higher-than-expected inflation readings for January.

The S&P 500 slipped 2.4% for the month, led lower by weakness in the

energy and real estate sectors. The growth-oriented Nasdaq held up a bit better, falling 1%, while the Dow Jones Industrial lagged with a 3.9% loss.

Core bonds, as measured by the Bloomberg Aggregate Bond Index, were down 2.6% during the month, reversing the fast start to the year.

Treasury yields were generally higher in February due to the increased rate hiking expectations.

In response to expectations that the Fed will keep interest rates higher for

longer, the Strategic and Tactical Asset Allocation Committee’s (STAAC)

slightly lowered its year-end S&P 500 fair value target to 4,300-4,400,

based on a price-to-earnings ratio of 18 and 2024 S&P 500 earnings per

share forecast of $240, and shifted some equities to fixed income in the

recommended asset allocation for March.

GPS: February 2023

Stocks took a step forward in putting a tough 2022 behind them with solid 

gains in January, as the S&P 500 returned 6.3% for the month. The growth-heavy Nasdaq fared better with a 10.7% monthly advance, led by double-digit gains in mega-cap technology stocks including Apple (AAPL), Amazon (AMZN), and Alphabet/Google (GOOGL). The Dow Jones Industrial lagged with a gain of just 2.9%.

Besides the end of seasonal tax loss selling, investor sentiment got a boost 

from further progress on inflation and signs that a “soft-ish” landing for the 

U.S. economy might still be possible, despite the Federal Reserve’s (Fed) 

aggressive tightening moves to date. Economic resilience in Europe and 

China’s reopening provided further support.

Core bonds, as measured by the Bloomberg Aggregate Bond Index, were up 

3.1 % during the month, to start erasing last year’s deep losses. Treasury 

yields were generally lower this month as there were further signs that inflationary pressures were starting to ease.

The Strategic and Tactical Asset Allocation Committee’s (STAAC) S&P 

500 year-end 2023 fair value target of 4,400-4,500 is based on a price-to-earnings ratio of 18.5 and 2024 S&P 500 earnings per share forecast of $240.

GPS: January 2023

A difficult 2022 for stocks did not end on a high note despite cooling inflation, as the S&P 500 slid 5.8% in December. The down month left the index down 18.1% for the year (total return including dividends), the index’s worst performance since 2008. The Dow Jones Industrials fared better, losing just 4.1% for the month and 6.9% for the year. The value style outpaced growth virtually the entire year, leaving the Nasdaq down 32.5% for the year after losing 8.7% last month.

The Federal Reserve (Fed) sent a clear “higher for longer” message to markets about its plans for rates to fight inflation. Fears of recession and downside risk to earnings dominated, drowning out optimism surrounding peak inflation and the impending end of Fed rate hikes.

Core bonds, as measured by the Bloomberg Aggregate Bond index, were down 0.45% during the month, bringing the full year loss to -13%, making 2022 by far the worst year for core bonds since 1976. Treasury yields rose slightly during the month with China easing its COVID-19 lockdowns, which will likely add to inflationary pressures.

The Strategic and Tactical Asset Allocation Committee’s (STAAC) S&P 500 year-end 2023 fair value target of 4,400-4,500 is based on a price-to-earnings ratio of 18.5 and 2024 S&P 500 earnings per share forecast of $240.

GPS: December 2022

Stocks added to strong October gains in November as the S&P 500 returned 5.6% for the month, leaving the index down 13.1% year to date. The Dow Jones Industrials fared slightly better, gaining 6%, while the Nasdaq added 4.5%. The Dow, up more than 20% from its September 30 low, to mark a new bull market, has lost just 2.9% year to date.

Better-than-expected inflation data for October helped give stocks a mid- month jolt and temper some fears of an overly aggressive Federal Reserve (Fed), but gains were pared amid persistent COVID-19 disruptions in China, and a lackluster third quarter earnings season overall. Market participants will be looking for more evidence of waning inflation and seasonal tailwinds to help stocks finish 2023 on a positive note.

Core bonds, as measured by the Bloomberg Aggregate Bond index, were up 3.7% during the month, which was the best month for core bonds since December 2008. Treasury yields fell during the month as the Fed is likely going to take a slower approach to rate hikes.

The Strategic and Tactical Asset Allocation Committee’s (STAAC) S&P 500 year-end fair value target of 4,000-4,100 is based on a price-to-earnings ratio of 17.5 times the STAAC’s 2023 S&P 500 earnings per share forecast of $230. Our earnings forecasts will be updated in the 2023 Outlook publication, due out December 6. 

GPS: November 2022

After ending September with a 24% loss for the year, stocks surged in October as the S&P 500 returned 8.1%. That strong gain trailed the Dow Jones Industrial Average, which surged 14% for the month, its best month since 1976.

Speculation that the Federal Reserve (Fed) would soon signal a slower pace of rate hikes amid some additional evidence of cooling inflation pressures, seemed to be the primary catalyst for the rally. Extremely pessimistic sentiment, historical seasonal tailwinds, positioning ahead of the midterm elections, and well-received earnings results also played a role.

Core bonds, as measured by the Bloomberg Aggregate Bond index, lost 1.3% during the month as Treasury yields rose modestly in October. The market’s expectation that the Fed may need to take rates higher and stay there longer than previously anticipated helped pushed Treasury yields higher.

The Strategic and Tactical Asset Allocation Committee’s (STAAC) S&P 500 year-end fair value target of 4,000-4,100 is based on a price-to-earnings ratio of 17.5 times the STAAC’s 2023 S&P 500 earnings per share forecast of $230.