Medicare Agent News: Calm Strikes the Market

Wednesday, March 29, 2023

Calm Strikes the Market

By Alex Eule| Tuesday, March 28

Time Out. After the panic that spread through financial markets for much of March, there's suddenly a strange calm in the air. The major indexes were little moved on Tuesday. It was the quietest day of the year based on composite trading volume on the New York Stock Exchange and the Nasdaq.

That's what happens when there's no Fed news, no earnings, no inflation data, and no banking panic in the headlines. Spring has sprung and traders are busy smelling the roses.

Interestingly, the banking turmoil of recent weeks seems to have had limited impact on consumers, at least according to the latest survey of consumer confidence from The Conference Board out today. Its consumer confidence index rose slightly in March to 104.2. The gain reflects an improved outlook for consumers under 55 years of age and for households earning $50,000 and over,” Ataman Ozyildirim, senior director of economics at The Conference Board, said in a press release.

"Tighter financial conditions have not materially impacted consumers’ confidence about the economy," LPL's chief economist, Jeffrey Roach, wrote today. "The availability of jobs and low unemployment more than offset the negative impact from recent banking crises."

Investors shouldn't get too complacent. With earnings estimates generally falling and bond yields rising, the attraction of stocks continues to fall, at least according to a Wall Street metric known as equity risk premium.

ERP takes a company's earnings "yield" -- earnings per share divided by the stock price -- and compares it to a risk-free return, usually Treasury bills or bonds. Multiple Wall Street analysts are now pointing to the relative risk in the current environment given high bond yields compared to low (and potentially falling) earnings yields. At 4%, Goldman Sachs notes that the equity risk premium is at a 15-year low in the U.S. In 2020, that premium was closer to 8%.

The Dow Jones Industrial Average and S&P 500 both finished the day down slightly, less than 0.2%, while the Nasdaq Composite was off 0.5%.