News reports this week revealed that Federal Reserve Chair Jerome Powell was recently tricked into a telephone call with a Russian prankster pretending to be Ukrainian President Volodymyr Zelenskyy. During his extended conversation with the imposter, Powell discussed monetary policy and asserted that a “recession is almost as likely as very slow growth” this year.

The call is embarrassing to the U.S., but it appears to have done no harm. Let’s hope Powell’s remarks on Wednesday are similarly innocuous.

The Fed’s policy-making arm, the Federal Open Market Committee (FOMC), started its two-day meeting today. On Wednesday, the FOMC will announce its decision on interest rates and Powell will hold his traditional post-meeting press conference.

Wall Street’s consensus is for the FOMC to hike rates by another 25 basis points, but no one can predict what Powell will say.

As I’ve observed in previous articles, Powell has a tendency to talk down the markets with commentary that’s confusing, contradictory, and gratuitously negative.

If history is any guide, trading on Wednesday will be volatile, especially after Powell steps up to the lectern to face the press. Powell has an unfortunate habit of blathering extemporaneously. Or to use Seinfeldian terminology, we usually get a lot of “yada yada yada.”

The good news is that stocks closed last week higher and the S&P 500 index has gained roughly 9% year to date. The S&P 500 and the New York Stock Exchange Advance/Decline line both hover well above their 200-day moving averages. The CBOE Volatility Index (VIX) currently sits at about 17, its lowest level in more than 18 months. This rally has shown momentum.

That said, stocks slipped Tuesday as investors nervously awaited the FOMC’s decision and Powell’s performance. The main U.S. stock market indices closed lower as follows:

• DJIA: -1.08%
• S&P 500: -1.16%
• NASDAQ: -1.08%
• Russell 2000: -2.10%

Bank sector jitters also played a role in Tuesday’s equity declines. Grabbing headlines Monday was news that the Federal Deposit Insurance Corp. (FDIC) had arranged closure of First Republic Bank and a sale of its deposits to JPMorgan Chase (NYSE: JPM).

JPM acquired more than $90 billion of FRC’s deposits and roughly $173 billion in loans. We’re likely to see a wave of additional mergers and acquisitions in the banking sector, as weak smaller banks get gobbled up by their larger, financially fit rivals.

First Republic branches reopened Monday as part of JPMorgan, with depositors having complete access to all funds.

FRC’s demise marks the fourth bank failure year to date, following Silicon Valley Bank, Signature, and Silvergate. However, the banking crisis seems contained to a handful of regional institutions that catered to concentrated niches (e.g., tech start-ups or crypto) that made them susceptible to panicky deposit runs. As yet, the financial turmoil has not been systemic, hence Wall Street’s muted reaction to FRC’s failure.

WATCH THIS VIDEO: Is This The Year for a Bull Market?

Regardless, equity investors enjoyed robust gains in the month of April, fueled by expectations that the Fed will soon cease its rate hikes, as well as a string of better-than-expected first quarter earnings results.

For Q1 2023, the blended earnings decline for the S&P 500 is -3.7%. If that number is the actual decline for the quarter, it will mark the second straight quarter that the index has reported a decline in earnings.

However, the earnings picture has gotten brighter. On March 31, the estimated earnings decline for Q1 2023 was -6.7%.

The search for value plays…

Stocks have been on an upward trajectory so far this year, but valuations remain historically low. The forward 12-month price-to-earnings (P/E) ratio for the S&P 500 currently stands at 17.73 (see the following chart).

This P/E ratio is below the five-year average (18.5). Now’s an opportune time to increase your exposure to companies that were beaten down in 2022 but which have given positive guidance for full-year 2023.

The technology sector stands out as a haven right now for value plays. Disruptive technologies, notably artificial intelligence and fifth generation (5G) wireless, continue their inexorable advance through society. The best-positioned companies belong in your portfolio.

Accordingly, you should know that my colleague Dr. Joe Duarte, chief investment strategist of Profit Catalyst Alert, has just pinpointed a tiny, unknown company that has developed a revolutionary “black box” technology.

You need to get in on the ground floor of this game-changing opportunity before the investment herd finds out and sends the share price soaring. Visit this URL for details.

John Persinos is the editorial director of Investing Daily.

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