The second quarter of 2023 just ended with a third consecutive strong quarterly performance by American stocks. Following a 7.6% gain in 4Q 2022, stocks gained 7.5% in the first quarter of 2023, and another 9.9% in the quarter that ended Friday, June 30, 2023.
The three quarters of strong returns were preceded by three quarters of losses in the first, second and third quarters of 2022. After hitting an all-time high on Jan. 3, 2022, the S&P 500 entered a bear market on June 23, 2022, when it dropped more than 20% from its record high. The bear market ended on June 10, 2023, when the S&P 500 closed more than 20% higher than its bear-market low.
Stocks overcame a sudden and unexpected risk to the banking system that began with the failure of Silicon Valley Bank in March and complicated the Federal Reserve’s aggressive monetary tightening campaign that began in March 2022.
The Fed hiked rates 10 times in 15 months and lowered inflation without triggering a recession.
The Atlanta Federal Reserve Bank’s GDPNow forecast is substantially higher than the Blue Chip consensus forecast. A 2.2% growth rate for the second quarter, which ended today, would be a pretty terrific outcome.
The U.S. government growth rate won’t officially be announced until July 27, and that is the first of two estimates before the final official growth rate of the U.S. – as measured by gross domestic product -- for the second quarter will be announced at the end of September.
The GDPNow forecast is a tool sponsored by the nation’s central bank branch in Atlanta. This forecast of the U.S. economy is updated throughout every quarter. The same day that new data about manufacturing, jobs, inflation, and other economic fundamentals are released, the GDPNow forecast is updated.
GDPNow is an algorithm-driven forecast, in contrast to the Blue Chip consensus forecast, which is a survey of economists. Since the pandemic, the GDPNow algorithm-driven forecast has been more accurate than the human economists. The algorithm’s 2.2% forecast is much more optimistic than the 0.9% economists expected on June 7.
The GDPNow-cast is a valuable tool in predicting economic trends, which are fundamental factors in stock prices. Here’s why: The growth rate of the U.S. for the second quarter will be released on July 27, but that will be an “advanced estimate.” The advanced estimate is subject to two revisions. The final growth rate of U.S. GDP will not be released until the end of the third quarter of 2023.
Sharing the GDPNow algorithm demonstrates the U.S. central bank’s commitment to transparency, innovation, and education. While the importance of GDPNow is not easy to grasp, the Fed publishes data beneficial to American investors, business owners, and the rest of the world -- but the “Now-cast” is an experiment and is not always accurate.
The Standard & Poor’s 500 stock index closed Friday at 4,450.38, up 1.23% from Thursday, and 2.35% higher than a week ago. The index is +98.91% from the March 23, 2020 bear market low and 7.22% lower than its January 3, 2022, all-time high.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market-value weighted index with each stock's weight proportionate to its market value. Index returns do not include fees or expenses. Investing involves risk, including the loss of principal, and past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted.