All asset classes showing positive returns so far in 2023 📈 Bob's Market Update
Channel: Payne Capital
Date: 2023-01-21

This week on the Street of Dreams, U.S. stocks rallied hard on Friday, led by strong gains in the tech sector, closing out what had otherwise been a rough week for the U.S. stock market. The S&P 500 finished Friday, up 1.9%, though it still closed the week, down just under 1%. The Dow was up 1% on Friday, while the technology-heavy NASDAQ composite closed up 2.9%, its biggest one-day gain since the end of November. 

Now, despite the volatility and despite closing down for the week, all asset classes are still showing positive returns so far in 2023. I spoke to my buddy the other day and he was wondering what I was going to comment on the January barometer. So here you go, Joe. The S&P 500 was up 1.4% for the first five days of trading last week, invoking the first five-day rule that states, "as goes the first five days, so goes the year". There's seemingly ample evidence backing this up as well. Since 1950, the S&P 500 has logged net gains during the first five days of the year a total of 47 times. Of those 47 instances, the index ended up the year, up 39 of them. That's an 83% success rate. Moreover, the average S&P gain was 14.3% in those years.

Another historical market pattern in the bulls' favor is the presidential cycle. The third year of a president's term, regardless of party affiliation, has experienced better-than-average returns. In addition, the midterms resulted in a split Congress ensuring gridlock in D.C. for the next two years, and historically, the nine months starting in the midterms year's fourth quarter has been the most positive stretch for the market since 1925. And last quarter was no exception, with the S&P up 6.6% in line with the midterm's fourth quarter average. And as good as that quarter was for the U.S. stock market, the big winner last quarter and so far this year have been the international markets.

Last year, many of you may be surprised to know that 70% of non-U.S. equity markets outperformed the U.S. in dollar terms. And so far in 2023, non-U.S. continues to lead the way like developed international markets like Europe, up 8% year to date, and emerging markets up a whopping 9% in just three weeks.

One more plus for the bulls is investment sentiment. It continues to be extremely negative, both for investors and economists. And as a result, investors have a record amount of cash on the sidelines. There is a mountain of money stashed in money market funds right now. Money market funds, also known as cash, reached an all-time high this week with a total record amount of $4.8 trillion, surpassing the 2020 COVID-19 peak of just under 4.8 trillion. This is contrarian bullish. And I get it. Money market funds are yielding close to 4% while they paid virtually nothing over the past ten years. I can only imagine where that stash of cash will go when rates start declining. My guess? It will head right into everything we already own. And I don't know about you, but I'm always willing to sell at a much higher price.

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