Summer is Here!

June 01, 2023

Summer sure does know how to hit us in Wisconsin.  We went from about 65 to 90 in the last week.  That’s the type of volatility you can only love with weather not investments.  Speaking of volatility, I found May to be quite an interesting month.  It would seem like the S&P500 would have a few days where nothing was happening.  It would be a slow downward slope, but then all of a sudden, we would be up 1% or so.  Then it would repeat again.  That’s a pattern that I’ll take all year and be extremely happy about.  Unfortunately, the bond markets aren’t rising so rapidly, but fell about a percent.  Here are some surprisingly optimistic details shared by LPL’s Research team recently.

  • Thursday, May 25th was the 100th trading day of the year and it has been a very productive first 100 days for stocks for sure.
  • Through yesterday, about 40% of the way through the year, the S&P 500 Index has gained a solid 8.1% (excluding dividends).
  • Since 1950, in years when the S&P 500 has been up at least 7% through the first 100 trading days, the average gain over the rest of the year has been a robust 9.4%. That compares to the average gain of 5.4% in all years from trading day #101 through year end.
  • The consistency of these strong finishes is also impressive. After these strong starts, the S&P 500 has added to those gains in 23 of 26 years (88%).
  • A gain of 9.4% over the rest of 2023 may be a bit more than we are comfortable asking for, but the midpoint of our year-end S&P 500 target range of 4,300–4,400 implies about 5% upside from Thursday’s close.
  • Averting recession for most of the year as inflation falls would likely be part of a strong second half stock market story. In that scenario, S&P 500 earnings may not have much downside to current consensus estimates of around $220 per share for 2023 (our forecast is $213). A Fed on the sidelines wouldn’t hurt—nor would getting past the debt limit dilemma.

A couple of the bigger variables that will play out over the next few months is labor markets and commercial credit.  There have been many articles written about this over the past month, but the bottom line is that we will see how well new financing and refinancing plays out for larger companies as their debt comes due.  If this is done well, we will see an excellent upside surprise.  If it’s done poorly, we will see near-term volatility, which doesn’t necessarily mean downside in the long run, but it does mean we will see larger down days than we are used to this year.

Now that summer is upon us, does that affect the market?  From my past work experience at a trading firm, yes, it does.  The larger traders/investors start to take their family vacations and holidays.  This removes a bit of the size and liquidity in the markets.  Sometimes when news breaks, it moves the markets too much in one direction because there are less people in the way.  It’s just something to remember every summer because it can sometimes affect your day-to-day portfolio a bit.  It tends to fix itself, but the ability to overcorrect seem to be higher when less people are participating.

Thank you all for your trust in us.  We are very appreciative of your business.  Have a great summer doing what you love!

Larry Mroczkowski


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All investing involves risks, including the loss of principal.