April 2023 Newsletter

The United States Stock Market

Welcome to the April 2023 Newsletter. This month, we’re discussing the economy, employment, financial terminology, and more.


The inverted yield curve and the Leading Economic Indicators, two reliable recession indicators, remain bearish as they're predicting a recession in the near term. In addition, the price of West Texas Intermediate (WTI) crude oil has dropped since the highs last June as per the one-year price chart below.

February 2022 to February 2023 UNCH graph.

Oil prices are down as demand is expected to drop during a recession. In late March, the price of WTI rose back up into the high $70s.

Now, another recession indicator has emerged—a significant drop in transportation prices. The volume of container traffic at our two busiest ports—Los Angeles and Long Beach—are down 38% from a year ago. Rail car and truck traffic are down 5% and 15% respectfully.

At this point, the next recession might be short and mild, or it might be long-lasting and deep. If we only had negative leading indicators we could more accurately predict, but we also have very strong employment conditions making short-term economic forecasting unpredictable.

What should investors do now? Check out our information under the category below, “Recommended Action for Your Stock Portfolio.”

At this time, portfolios are 70% to 80% invested in the stock market and based on each investor’s objectives, risk tolerance, and time frame. The rest remains in cash. We recommend employees continue to save every pay period in their employer’s retirement plan and in a Roth IRA for their spouse and themself.


Quote of the Day

Captain John Smith (1580 to 1631) was an adventurer, soldier, explorer, and author.


“If you don’t work, you don’t eat.”

Captain Smith was in charge of the English settlement in Jamestown, Virginia. It was settled by 104 English men and boys on May 13, 1607.

Captain John Smith (1580 to 1631) was an adventurer, soldier, explorer, and author. Through the telling of his early life, we can trace the developments of a man who became a dominate force in the eventual success of Jamestown and the establishment of it legacy as the first permanent English settlement in North America.


Pop Quiz

Which countries are in the G7 and what do they do?

The answer is at the bottom of the newsletter.


The Economy


Total U.S. nonfarm payroll employment rose in January by a significant 311,000 while the official unemployment rate, U-3, increased to 3.6%. The December 2022 and January 2023 combined employment numbers were revised down by 34,000.

The Job Openings & Labor Turnover Survey (JOLTS) decreased slightly to 10.8 million open jobs across the country as of the last business day in January. This compares to 11.0 million open jobs the month before.

The seasonally adjusted Total U.S. Unemployment Rate, U-6, increased in February to 6.8% from 6.6% last month. There were 6.5 million people unemployed in January, age 16 and older, compared to 6.4 million last month. The increase in the unemployed can be attributed to more people who are able to work are now looking for work.

The following chart is based on the Bureau of Labor Statistics official unemployment rate, U-3.

February 2021 to February 2023 Unemployment rate chart

Unemployment Rates by Education Level, January 2023

Less Than High School Diploma5.8%
High School Graduate, No College3.6%
Some College or Associate's Degree3.2%
Bachelor's Degree or Higher2.0%







Average hourly earnings of all employees on private nonfarm payrolls were up 4.6% compared to a year ago.

Leading Economic Indicators (LEI)

The LEI for February dropped by 0.3%, the same drop as in January. Below are the previous monthly LEI results:

  • January '23 -0.3%
  • December '22 -0.8%
  • November '22 -0.8%
  • October '22 -0.9%
  • September '22 -0.5%
  • August '22 -0.1
  • July '22 -0.5%
  • June '22 -0.7%
  • May '22 -0.4%
  • April '22 -0.4%
  • March'22 +0.1%
  • February '22 +0.6%
  • January'22 -0.5%

With eleven negative consecutive readings, the LEI continues to signal recession in the near term. The Conference Board said, “Our forecast of declining consumer spending will most likely push the U.S. economy into a recession in the near term.”

Gross Domestic Product (GDP)

The Bureau of Economic Analysis said the third and final estimate for GDP in the fourth quarter of 2022 was 2.6%. That was a slight decrease from the estimate last month of 2.7%. The 2.6% increase was due to increases in private inventories and consumer spending. GDP results in 2022’s first three quarters were a decrease of 1.6% in the first quarter, a decrease of 0.6% in the second quarter, and an increase of 3.2% in the third quarter.

April 2023 Real GDP graph from 2019 to 2022


Annual inflation decreased in February to 5.0% as measured by the Personal Consumption Expenditures (PCE) index. The previous month was 5.3%. The core PCE index, which excludes food and energy, declined slightly to 4.6% in February from 4.7% in January.

Here is a bit of PCE core inflation history this cycle:

  • January 4.7%
  • December 4.6%
  • November 4.8%
  • October 5.1%
  • September 5.2%
  • August 4.9%
  • July 4.7%
  • June 5.0%
  • May 4.9%
  • April 5.0%
  • March 5.2%
  • February 5.3% (peak PCE core inflation this cycle)

After the inflation setback in January with PCE inflation rising to 5.3%, February’s decline back to 5.0% was certainly welcomed. PCE inflation was as high as 6.1% in October. As long as we have steady and consecutive decreases in inflation, the Fed will be encouraged to stop raising interest rates.


The Public Debt as Issued by the U.S. Treasury, March 31, 2023


Last month it was $31,457,247,000,000.


Important Dates in April

April 1 – April Fools’ Day

April 2 – Palm Sunday

April 4, 1968 – Dr. Martin Luther King Jr. was assassinated in Memphis, Tennessee.

April 5 – Passover

April 7 – Good Friday

April 9 – Palm Sunday in 1865. General Lee surrendered to General Grant ending the Civil War.

April 9 – Easter Sunday

April 13 – Thomas Jefferson’s birthday. Thomas Jefferson was the author of the Declaration of Independence and our third president, having served two terms.

April 14, 1865 – It was Good Friday in 1865. Abraham Lincoln, the 16th U.S. President, was assassinated in Washington, DC. He died the next morning on Saturday. The next day was Easter and became known as Black Easter. Lincoln was the first U.S. President to be assassinated in office.

April 15, 1947 – Jackie Robinson first stepped onto Ebbets Field and played first base for the Brooklyn Dodgers breaking the color barrier in Major League Baseball.

April 17 – Patriots Day, celebrated on the third Monday in April. This day commemorates the Battle of Lexington and Concord which took place on April 19, 1775. These were the first battles fought in the American Revolutionary War.

April 18 – Federal Tax Day is the last day to submit a 2022 federal income tax return or submit an extension that delays filing until October 15. In either case, any money due the IRS must be paid by April 18, 2023, to avoid a penalty and interest.

April 22 – Earth Day

April 30, 1945 – Hitler commits suicide


The Stock Market


This month we will hear from a Wall Street strategist.

Jeffrey Gundlach is an American businessman, investor, and philanthropist.

Jeffrey Gundlach

Gundlach is an American businessman, investor, and philanthropist. He's the founder and CEO of DoubleLine Capital LP, an investment management firm now based in Tampa, Florida with offices in Los Angeles, Dubai, and Tokyo.

Note: DoubleLine is one of the latest companies to move its headquarters from Los Angeles to another state.

Jeffrey said on CNBC on March 27, “I predict the Federal Reserve will be cutting rates substantially soon. I am wrong about 30% of the time so factor that into your decision making. The 2-year Treasury was at 5.10% and now it is at 4% due to the banking crisis. That is a big drop in yield and a big increase in the price of existing bonds. I think the Fed is not going to raise interest rates unless the existing 2-year Treasury rates starts to go back up.”

“Almost everyone now sees a recession is coming. It’s just a question how severe it will be.

“The high yield (junk) bond market has shut down. We haven’t had a new junk bond issuance since March 2. Existing junk bonds are also in trouble. The yield spread between junk bonds rated CCC (the lowest credit rating of junk bonds) compared to those rated BB (the highest credit rating of junk bonds) has widened considerably. This large spread is a sign of poor health in the credit markets. As small and mid-sized companies try and refinance their existing loans from say 6% that are coming due, they will find banks—if willing to loan them any money—now want 12%. This will drive more small and mid-size business defaults. This is bad news for a pending recession.

“And lastly, the best indicator of a recession is whether the yield curve is inverted. And of course, it is and has been since April 2022.”


Stock Market Valuation

Mark Newton, Head of Technical Strategy at Fundstrat Global Advisors, New York, NY.

Mark Newton

Head of Technical Strategy at Fundstrat Global Advisors, New York, NY.

Mark said on March 24, 2023, on CNBC, “I think the current stock market pullback (in March) is going to be minor in scope, but we need some stabilization in the banking sector. Investors are concern about the FDIC backstopping all bank deposits.”

“Sentiment has become very negative. Sentiment is borderline on fearful if we don’t stabilize. Some of this screams with hysteria. Actually, a very negative sentiment is very positive for the market. Also, when we have a divided government, this tends to positive for the stock market. I see the low point for the S&P 500 at 3800 max by the end of March. And historically April tends to be the best month in the year for the stock market.”

We're now very early into 2023. Lorenz Financial believes the market will end 2023 between 4,100 and 4,400 on the S&P 500 Index. We might retest the October lows of 3,577 to 3,588 but only if a moderate recession or worse begins later this year.

The S&P 500 Index closed on March 31, 2023, at 4109.31.

Monthly Performance of the S&P 500 Index












Recommended Action for Your Stock Portfolio

Stock market strategists will say, we can not accurately predict what the markets will do in the short-term, but in the long-term, we are always bullish (one who is positive on the outlook for the stock market).

Why? Because in the very long term, the U.S. stock market has gone up on average 10% per year since 1926. But the market never goes up exactly 10%. It is always more than or less than 10% with the long-term annual average being up 10%.

In the mid-term, most strategists are predicting a recession beginning in late 2023 or early 2024. If that occurs, the stock market will very likely drop from its current level to a lower level. So that leaves us with two possible strategies going forward:

1) Hold tight and don’t sell. Assuming a recession is coming, just ride it down and then ride it back up. This works as no one can consistently repeatedly predict when to sell (prior to the downturn) and when to buy (at the bottom).

2) But riding the market down causes some people to lose sleep and worry about their retirement money. If a person feels like selling, we think it should be implemented very soon. See the chart below on the S&P 500 performance since April 2022.

S&P 500 range bound since April 2022

In our opinion at Lorenz Financial, the more an investor sells, the riskier it is as who is going to tell you when to buy back in? Remember, no one rings a bell and says, “It’s time to buy back in!” Our recommendation to our clients has been to add 20 to 30% to an investor’s cash holdings and using our research (which is not perfect), decide when to buy back in.

Longer term we expect the S&P 500 index to challenge the 5,000 level sometime in 2024. If so, this will establish another all-time new high. In the meantime, if the S&P drops below 3,700 as we approach a recession, we would consider the market attractive for purchase.


Financial Markets Vocabulary

Who is Morningstar and what do their stars mean?

Morningstar is a Chicago-based investment research firm that compiles and analyzes data on mutual funds, exchange traded funds (ETF), and stocks. They provide an extensive analysis for free at: https://www.morningstar.com

They also provide more detailed information at their “investor” site for $249 per year or $34.95 per month. We do not recommend the casual investor sign up for this service as it is too expensive. Lorenz Financial subscribes to this service to enable us to answer all your mutual fund and ETF questions.

Morningstar rates the historical performance of many mutual funds and exchange traded funds (ETFs) with stars. Their star ratings are offered at 3, 5, 10 years and an overall rating. Star ratings change as the performance of a fund changes.

For example, look at the fund: American Century Emerging Markets, investor class, TWMIX. We're not recommending this fund at this time but showing it only as an example. Morningstar star ratings for this fund are below:

3 Year5 Year10 YearOverall
1 Star2 Star3 Star2 Star


So, what do the stars mean? The ratings range from 1 to 5, with 5 being the best.

5 Stars mean the fund’s performance is in the top 10 percent of funds in its category (not the top 10% of all funds!).

4 Stars – in the next 22.5%
3 Stars – the middle 35%
2 Stars – the next to the bottom 22.5%
1 Star – the bottom 10%

At Lorenz Financial, we strive to find the best funds going forward. The Morningstar star rating is helpful, but it is only rearward looking. It is not a guarantee of future performance.


OK, Now What Do I Do?

This is our third part of a four-part series on, “Know Your Financial Numbers”. Here are questions 11 through 16 for you and your spouse. You both should know these numbers. If you don’t, Lorenz Financial suggests, please spend some time, and research your numbers!

Retirement, Social Security, & Medicare

First recognize you will not be a happy retiree if all you have to live on is Social Security. In 2022, the average Social Security check is $2,484 per month.

11. What is your Full Retirement Age (FRA) as defined by Social Security?

12. At what age are you targeting to retire?

13. At what age will your home mortgage be paid off and all other debt permanently eliminated?

14. At what age are you planning to begin receiving Social Security income?

15. What does your personalized Social Security report say today regarding your spouse’s and your Social Security income when you retire? To find out, go to: https://www.ssa.gov/myaccount/

16. After turning 65 and going on Medicare, how much are you going to be paying for Medicare per person and per month? Will your retirement income be so high that it will trigger paying the additional fee for Medicare? This add-on fee is called the Income Related Monthly Adjustment Amount (IRMAA). IRMAA has six brackets and can be hundreds of dollars per month per person. Are you going to be paying IRMAA?

Next month we will have five more numbers everyone should know. Our categories will be, Credit Score & Debt and Risk & Asset Allocation.


Our Financial Bad Boy This Month

Silicon Valley Bank Collapses

Source: The Wall Street Journal, March 11-12, 2023, pages A1

A brief recap of bank failures in March:

March 8 – Sivergate Bank, San Diego, CA, announced they intend to wind down operations and voluntarily liquidate.

March 10 – Silicon Valley Bank (SVB), Santa Clare, CA, was closed by the California Dept of Financial Protection and the FDIC.

March 12 – Signature Bank, New York, NY, shut down by FDIC and the Federal Reserve.

March 12 - Treasury Secretary Yellen, Federal Reserve Chair Powell, FDIC Chair Gruenberg, and Director of the National Economic Council Director Brainard, met and determined there was a “systemic risk to the U.S. banking system” and thereby were authorized by law to transfer all assets of SVB, insured and uninsured, to the newly created bridge bank, SV Bridge Bank NV. Customers therefore had full access to their money on the morning of March 13 for both Signature Bank and SVB.

March 16 – Eleven major banks moved $30 billion of uninsured deposits into First Republic Bank, San Francisco, CA, to help it stay afloat.

March 19 – UBS agreed to buy their in-country competitor, Credit Suisse for $3.2 billion. Both banks are based in Zurich, Switzerland.

Silicon Valley Bank collapsed on Friday, March 10, due to a run on the bank. Depositors were frightened at least in part by the billionaire, Peter Thiel, who on Thursday, March 9, said to SVB depositors, “There is no downside to withdrawing your money from SVB.”

Silicon Valley Bank

In the week before the collapse, Moody’s Investors Service reportedly informed SVB Financial, the bank’s holding company, that it was facing a potential downgrade of it credit rating because of its unrealized losses. On March 8, Moody’ downgraded SVB bonds. On March 9, customers withdrew $42 billion, leaving the bank with a negative cash balance of about $958 million. On March 10, trading of SVB stock was halted and the bank was closed.

Reuters reported that 89% of the deposits in receivership at SVB were uninsured as they exceeded the FDIC insurance level of $250,000 per account.

Kevin O’Leary, “Mr. Wonderful” on the TV show, Shark Tank, perhaps said it best when he said, “Federal regulators can’t keep propping up banks run by idiots!”

We would also add, why should the federal government underwrite bank depositors who recklessly put millions of dollars into bank accounts that are insured only to $250,000?

As of December 31, 2022, Warren Buffett’s portfolio shows he has invested a lot of money in the stock market. He also keeps a lot of cash available for “opportunities” that on occasion become available. At 2022 year-end, Warren had $32 billion in cash. But he has none of his “cash” in a bank. Warren puts his cash in Treasury Bills.


The Bond Market


Lorenz Financial has been purchasing research on the bond market for years. Recently, our source has decided to get out of that business. Therefore, our future comments on the Federal Reserve and the U.S. Treasury in this newsletter will be minimal.

Recommended Action for Your Bond Portfolio

This month our recommendations for an investor’s safe money has not changed.

  • Very Short-Term Investment-Grade bond fund
  • Short-Term U.S. Corporate or Securitized bond funds
  • Certificates of Deposit (only if FDIC or NCUA insured)
  • U.S. Savings I-Bonds (max savings is $10,000 per account per year)
  • Cash (in a money market mutual fund paying 4.00% to 4.7% per year)



Pop Quiz Answer

Which countries are in the G7 and what do they do?

Answer: U.S., Canada, UK, France, Italy, Germany, Japan

The G7 is a high-profile venue for discussing and coordinating solutions to major global issues, especially in the area of trade, security, and economics. And of course, they have great photo ops for the G7 leaders.