Looking Back at the Markets in April and Ahead to May 2023

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After moderate gains in March, markets continued to rally in April. U.S. markets were up by low single digits, while bond markets were moderately positive. International markets were mixed, with developed markets showing modest gains while emerging markets ticked down. Given the downbeat expectations for earnings at the start of the month, the gains may be a positive sign for the next several months.

Looking Back

The markets. For the actual numbers, the S&P 500 gained 1.56 percent in April, while the Dow Jones Industrial Average rose 2.57 percent. The Nasdaq Composite did the worst of the three, with the technology-heavy index up only 0.07 percent. Developed markets, as represented by the MSCI EAFE Index, rose 2.82 percent, and the MSCI Emerging Markets Index lost 1.1 percent. Fixed income also showed gains, with the Bloomberg Aggregate Bond Index up 0.61 percent for the month, while the Bloomberg U.S. Corporate High Yield Index gained 0.61 percent as both rates and spreads ticked down. Overall, it was a solid month for financial markets, with trends remaining positive for all indices.

Earnings and fundamentals. Better-than-expected fundamentals drove the gains in April. First-quarter earnings came in much better than anticipated, while interest rates also ticked down. We may see better-than-expected results this month as well, which could be a tailwind for stock prices.

The economy. While financial markets largely gained last month, the economy showed signs of slower growth. Labor market indicators, including job openings and hiring, continued to slow, while some measures of consumer confidence ticked down. Business confidence indicators also declined. The manufacturing survey stayed in recessionary territory, while the service sector remained below its previous strong level.

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