Valentine’s Crush
March 6, 2023
In past years, February has been a volatile month for the market and this year was nothing new. For the month, we saw a decline in equities, continued job loss in the technology and entertainment industries, and the Federal Reserve’s announcement declaring its intention to continue increasing interest rates.1 The NASDAQ closed down by -2.45%, the S&P 500 finished the month down -3.54% , and the Dow Jones Industrial Average slid even further and dropped -4.20% during the month. Among the troubles we saw this month, we also saw the price of gold drop 6.54%, as shown by the SPDR Gold Trust (GLD) ETF. So, while the NASDAQ outperformed the other major indices by month’s end, all three experienced heavy volatility in February.
The market hit a high right after Valentine’s Day and then began its downward trend from which it has yet to turn around. Although markets were only open for four days, the week of the 20th was the worst week of the month for equities. That week alone, the S&P 500 and the Dow both closed down -1% and the NASDAQ closed roughly -1.7%. To end the week, disappointing inflation data was released by the Fed early on the 24th and, in turn, the market had its worst day of the month. Investors and consumers fears of recession were not lessened by news of increasing interest rates and observing the market suffer a few consecutively negative weeks.
Consumers have felt some relief lately as gas prices have remained relatively low. However, the U.S. labor market is still widely considered hot and unemployment remains at historically low levels. This sentiment remains despite multiple high profile firms in the technology and entertainment industries undertaking large belt-tightening measures.
Global markets performed well in the last four weeks and the trade deficit that the US has faced for nearly two years continued to slowly decrease. But, unfortunately, consumer spending makes up the majority of the U.S. economy and the consumer staples and utilities sectors of the S&P 500 closed down for the third month in a row. Furthermore, households have begun to take on more credit card debt.2
While we know that interest rates are going to continue to increase as the Fed tries to tame inflation, there is still uncertainty in the market right now, specifically surrounding a possible recession. After the strong start we saw in January, February has served as a stark reminder of the uncertainty that our economy still faces.
Hazel Allen
Portfolio Management Analyst
1https://www.federalreserve.gov/monetarypolicy/fomcminutes20230201.htm
Published February 22, 2023; Accessed March 2, 2023
2https://www.cnbc.com/2023/02/03/us-credit-card-debt-jumps-18point5percent-and-hits-a-record-930point6-billion-.html
Published February 3, 2023; Accessed March 2, 2023
The NASDAQ Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market and it is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies.
The S&P 500 Index is the Standard & Poor’s Composite Index of 500 stocks and is a widely recognized, unmanaged index of common stock prices.
The SPDR Gold Shares ETF (GLD) tracks the price of gold bullion in the over-the-counter (OTC) market.
An Exchange Traded Fund (ETF) is a fund that tracks a specific index (bonds, commodities, etc.) but trades on stock exchange in the same manner as common stocks. ETFs tend to have higher liquidity than mutual funds.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange.
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