(26 March 2023) Stocks extended their rebound last week despite a Fed rate hike and Jerome Powell’s insistence that a pivot would be unlikely in 2023. The S&P 500 added more than 1% to 3970 while the Nasdaq-100 continued to outperform gaining 2% to 12,767. While the FOMC meeting did generate some of the anticipated volatility on the Jupiter-Saturn and Mars-Pluto alignments, the downside proved to be all too fleeting as dip buyers moved in later in the week.
Markets are showing signs of life here after Treasury Secretary Janet Yellen’s reassurances that the banking system is stable and the government stands at the ready to deal with any future problems. The recent string of bank failures has nonetheless pummeled financial stocks, even if some investors have chosen to ride out the storm in the relative safety of big tech stocks. The banking turbulence has taken short term bond yields to new lows in the face of rising recession risks. Certainly, the new low on the 2-year at 3.76% reflects increasing concern that growth is more likely to stall in the coming months, especially since the Fed funds rate of 4.88% is now fully 1% above the 2-year yield, thus indicating an extremely restrictive monetary stance. Even if FedWatch now puts the odds for a pause in hikes at 80% at the next FOMC meeting on May 3, the economy is more likely to lose altitude in the near term as credit will remain tight in the wake of the turmoil surrounding SVB, Credit Suisse and Deutsche Bank. One chart to watch in this respect is the 10-year Treasury yield which tested December and January support at 3.35-3.40% last week as inflation expectations fall in the face of a possible slowdown. In the event of another round of banking distress or poor economic data, a move below 3.35% could create another wave of uncertainty across financial markets.
The planetary outlook leans bearish. While we did get a brief sell-off last week near the time of the Jupiter-Saturn alignment, the market was surprisingly resilient. To be sure, we knew that the ongoing Jupiter-Chiron-Uranus alignment was a potential counterweight to Saturn’s bearishness but I thought the 13-day and 27-day progressed cycles might have cast the deciding vote in favor of the bears. Since the timing of progressed cycles has a wider margin of error, we cannot yet say these bearish influences have been negated…
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