Thursday's Markets Update (April 27, 2023)

28 Apr 2023 by rate3

On Thursday, markets were excited by tech companies' better-than-forecast earning reports, with Intel (-0.04 EPS vs -0.16) gaining 4.92 percent and Meta continuing to rise. The NASDAQ (o: 11972, c: 12142) increased by 1.4 percent, while BTC (o: 28862, c: 29673) added 2.8 percent. However, traders ignored the macroeconomic side, where BEA posted its Q1 GDP estimate at 1.1 percent growth, following a 2.6 percent increase in Q4. Additionally, the DOL showed a decrease in unemployment claims to 230K from 246K the previous week (markets expected a rise to 249K). Overall, with players continuing to fight the Fed, volatility remains high.

The economy grew by 1.1 percent in Q1, missing market expectations of a 2 percent growth and relenting from a 2.6 percent increase in Q4. The major slowing factors are lack of investments and collapsing housing market, both, on the residential side where investment contracted for the 8th consecutive period (-4.2 percent vs -25.1 percent in Q4) as well as on the non-residential side where growth slowed sharply (0.7 percent vs 4.0 percent). At the same time, consumer (3.7 percent vs 1.0 in Q4) and public (4.7 percent vs 3.8) spendings keep growing despite a persistently high inflation.

It is not rocket science to figure out that with such a strong demand side and recovering supplies, our present economic hardships are absolutely unnecessary. They are 'Powell-made.' The chairman's lack of practical experience is uniquely combined with his non-professionalism, which prevents him from accepting new macroeconomic realities.

Obviously, thinking about the 1970s as a precedent for the 'returning with vengeance inflation,' Powell makes a rookie OG mistake by ignoring technological progress and a younger, much more diverse, and less risk-averse generation of fund holders. Additionally, privately managed capitals (including individuals and overseas) have now comparable size to corporations and governments, and it allows to a "public" to play a much more important role in reaching an equilibrium in money markets.

Furthermore, new technologies allow for faster alleviation of the consequences of rising prices by redirecting investments towards the most productive industries and increasing productivity while decreasing prices. With his not-well-thought-through, scholastic, fast-food approach to market 'regulation,' Powell is only prolonging the recession and worsening the economic situation for everyone in the world.