Equities posted mixed returns in April. Positive factors came from the tax season, while headwinds came with the renewed banking turmoil. On the first point, companies averaged positive surprises in EPS compared to analysts’ estimates. Credit goes to the strongest week in which the results of tech giant Caps were released, which gave a positive boost to stock markets. On the other hand, fears of a possible slowdown and recession returned, which weighed especially on cyclical stocks. Meanwhile, First Republic Bank, the 14th largest U.S. bank in terms of assets, revealed a deposit outflow of more than $100 billion in the first quarter, generating concerns in the markets. In macroeconomic terms, inflation was up 5.0% ( prec. 6.0% ), Q1 GDP was 1.1% ( prec. 2.6% ), and the labour market remains tight/limited, with employment continuing to grow at a brisk pace. According to Factset, midway through the Q1 2023 earnings season, companies in the S&P 500 index are performing better than analysts’ expectations from Q4 2021. Both the number of companies reporting positive EPS surprises and the magnitude of those surprises are above the 10-year average. The index reports higher earnings for the first quarter today compared to the end of last week and compared to the end of the quarter. However, the index continues to report a year-over-year decline in earnings for the second consecutive quarter. Operationally, we have not changed our strategies and portfolios much, maintaining an average equity exposure of about 70%. Banking tensions could lead to a further tightening of credit standards, which would cause a slowdown in economic growth, especially in more developed economies. Regulatory support favours growth stocks, which are present in most of our portfolios.
We continue to monitor the situation closely, preferring high-quality stocks within equity allocations.
We remain firmly invested in the sectors
Megatrends – Robotics – Building Products – Materials – Utilities – Banks – Diversified Financial – Food, Beverage & Tobacco – Hotels Restaurants & Leisure – Nasdaq Selection 10 in addition to a new line inserted this month Pharmaceuticals & Life Sciences, the lines Aerospace & Defense – Semiconductor and Communication Services were closed positively.
We have also inserted for prudence a small short on S&P 500.
Trying to balance sectors and investment timing, well assisted by our market system screening based on our AI.