Texas Capital Bank Client Support will be closed for Memorial Day on Monday, May 29, 2023. We will be back to our normal 8:00 AM to 6:00 PM support hours on Tuesday, May 30, 2023.

We will be making updates to our website from 9:00 p.m. CST to 11:00 p.m. CST on 05/24. During this time, the website may experience some interruptions of functionality or be unavailable.

Break higher – please — Week of May 22, 2023

Business Man sitting on couch with laptop looking outside window

FedX? No delivery today…







Index Level

S&P 500 Index







Dow Jones Industrial Average







Russell 2000 Small Cap







NASDAQ Composite







MSCI Europe, Australasia & Far East







MSCI Emerging Markets







Barclays U.S. Aggregate Bond Index







Merrill Lynch Intermediate Municipal







As of market close May 19, 2023. Returns in percent.

 Strategy & Positioning 

 — Steve Orr 


A Fork

Sector performance for 2023 is almost a mirror image of 2022. Mega-cap Tech has pulled away from the rest of the market, copying Energy’s run last year. Last week the S&P 500’s tech sector and the NASDAQ 100 index (top companies in the NASDAQ) both hit 52-week highs. The big tech companies generate tons of free cash flow and have the Artificial Intelligence hype on their side. Cash flow is always a desirable trait for a company, even more so if the economy may be slowing. 

Last year’s recovery story from shutdowns saw Energy (+64%) and Utilities (+1.4%) do their best to help the S&P 500, while anything perceived as work-from-home or interest rate sensitive got tossed in the river. Tech fell -27%, and Consumer Discretionary (Amazon, Autos) dropped more than a third, finishing down 36%. 

Thanks to a near one-quarter weight in the S&P 500, Tech’s 27% rise this year has pulled the ¬500 along to a fine 9.9% return through Friday’s close. The five biggest names in the index, Apple, Alphabet (the two Google stocks), Microsoft, Amazon and Nvidia account for 80% of the S&P 500’s rise this year. That group’s combined market capitalization is over three times the size of the entire U.S. Small Cap universe, according to Barron’s. Meanwhile banks and Small Cap are bringing up the rear. 

Markets think bank troubles were a March event. The $2.6 billion sale of real estate loans by PacWest suggests otherwise. The first inning may be over, but we think there are more issues that will come to light in the coming months. Nowhere near 2008–09, but headlines will happen as balance sheets get sorted. 

Small company stocks and banks typically lead the stock market out of a Bear cycle low. Small stocks briefly did move to the front of the pack — long enough that they drove a signal in our indicators to add a half position. A sizable portion of the Small Cap universe is made up of financials and banks. As the deposit flight issues came to light, traders pushed small to the back of the bus. Small Cap stocks as a group are up about 1.3% year-to-date, not bad pre-recession, but March performance took a sharp fork in the rally road. A turn in the D.C. debt news and economy may swing regional banks and Small Cap back in line with their mega-cap big brothers. 


Traders got another dose of Chairman Powell last Friday. Remaining a model of consistency, the Chairman repeated that a pause in rate increases at the June meeting was a likely outcome. Fed Committee members are either divided on more increases or waiting. We would point out that one of the Fed’s favorite inflation indicators is the Personal Consumption Expenditures measure. The monthly release for PCE is this Friday and is estimated to be 4.6% for April. In the past, the Fed has not stopped raising rates until the Fed Funds range (now 5% to 5.25%) is above inflation. So, check that box for PCE. CPI inflation is hovering around 5.5%, so barring some inflation shock event, we may be close to the end of this rate increase cycle. 

Through Tuesday morning there is no special delivery for traders from D.C. Speaker McCarthy called off negotiations Friday and talks resumed Monday. We believe one reason that markets are not jumpier about the June 1 “run-out-of-money by X date” is that from the beginning the House bill and negotiations were about how to raise the debt limit, not if. Past bouts of volatility around debt ceilings were focused on worries that Congress would not raise it. 

Congressional rules set a timeline for how a bill moves through posting, review and voting. Combined with Congressional recess, the window for a deal before June 1 is very close to slamming shut on D.C. fingers. Please bear in mind that the Treasury will not “run out” of money. There is a minimum amount that the Treasury keeps in its General Account — in the low tens of billions. Default is a minuscule probability. The headlines and political pressure are another matter for folks unfamiliar with the process. Crossing the X date into June should also spur Congress if there is no agreement by then. There is a 2013 memo somewhere in the Treasury Department that outlines payment priorities. In every case interest on the national debt is paid first. This fiscal year, the Treasury should take in at least $4.2 trillion in revenue and the expected interest payments are around $700 million. Quarterly tax revenue should hit on June 15, making debt principal payments possible. 

The Treasury market is lowering prices slightly in anticipation of a deal. Once a deal is reached, primary dealers will have to buy and distribute nearly $1 trillion in new Treasury debt — pent up spending that has been on hold since the debt limit was reached back in January. Economics 101: a big supply is likely to reduce the price. Thus, traders are lightening up a bit on inventories by cutting prices. Yields are higher over the last 10 trading days by about a quarter of a percent. If markets were more worried about a deal getting passed, stocks would be more wobbly and bond prices would be rising, not falling. 


The six weeks leading up to May 15 saw stock indices move less than 1% on average. Last week the big guys got busy moving higher again. S&P 500 and NASDAQ are bumping up against resistance for the third time in a year. The Dow Jones indices are all in downtrends, along with Mid and Small Cap stocks.

Consumer sentiment remains negative. Home Depot, Target and TJ Maxx earnings show they are getting stingy about buying big ticket items. The Fed is in pause mode until the economy posts stronger growth numbers. Fed, Debt and Recession remain the biggest bricks in the Wall of Worry. We are beginning to wonder if the Recession is already here. If so, expect the economic data to muddle along and unemployment to rise over the summer. Cash at nearly 5% pays us to be patient.

Steve Orr is the Executive Vice President and Chief Investment Officer for Texas Capital Bank Private Wealth Advisors. Steve has earned the right to use the Chartered Financial Analyst and Chartered Market Technician designations. He holds a Bachelor of Arts in Economics from The University of Texas at Austin, a Master of Business Administration in Finance from Texas State University, and a Juris Doctor in Securities from St. Mary’s University School of Law. Follow him on Twitter here

The contents of this article are subject to the terms and conditions available here.