You’ve probably heard the phrase “April is the cruelest month.” The words originated in a 1922 poem by T.S. Eliot called The Waste Land. A devout Christian, Eliot meant that in the modern secular world, spring offers no rebirth from the metaphorical death of winter. For the faithless, April is a false promise.

The first quarter of 2023 witnessed promising economic data and a rising stock market, but April certainly has been cruel so far. Below, I examine how investment conditions have taken a turn for the worse in recent days. I also steer you toward a steady source of income that defies these headwinds.

Payroll processing firm ADP (NSDQ: ADP) reported Wednesday that hiring in the private sector unexpectedly slowed in March. ADP’s private payrolls report showed that U.S. companies added 145,000 jobs in March, below consensus estimates for a 210,000 gain.

On Monday, the Institute for Supply Management (ISM) reported a larger-than-expected decline in the U.S. Manufacturing Purchasing Managers’ Index (PMI).

The ISM Manufacturing PMI decreased to 46.3 in March 2023, the lowest reading since May 2020, versus 47.7 in February and a consensus expectation of 47.5. The reading pointed to a fifth consecutive month of contraction in factory activity.

The PMI decline suggests that rising interest rates, lingering anxieties in the financial services sector, and the growing odds of a recession are starting to weigh on businesses (see chart).

On Wednesday, the ISM Services report for March also showed declines, coming in at 51.2, versus 54.4 expected and 55.1 previous.

The banking crisis fallout…

Banking turmoil has eased, but the ripple effects are still playing out. Banks already are toughening credit standards. Cautious bankers combined with rising interest rates equals a liquidity squeeze, which is deleterious for the stock market.

WATCH THIS VIDEO: Stocks End Q1 on a High Note…Can it Last?

Diminished liquidity is likely to exacerbate the economic slowdown, but by the same token, this recessionary dynamic will dampen inflation and encourage the Federal Reserve to be less aggressive. Regardless, hopes for a “soft landing” are out the window. The majority of economists predict that a full-fledged recession is around the corner.

That said, the main U.S. stock market indices on Thursday closed out the holiday-shortened week with gains, as investors anticipated a reassuring jobs report scheduled for release on Good Friday (the markets are closed April 7).

The benchmarks finished the trading day Thursday as follows:

• DJIA: +0.01%
• S&P 500: +0.36%
• NASDAQ: +0.76%
• Russell 2000: +0.13%

Perhaps the cruelest blow this month occurred when the Organization of the Petroleum Exporting Countries and its allies (aka OPEC+) announced on April 2 that they would cumulatively slash crude oil production by another 1.16 million barrels per day (bpd) until the end of 2023.

Essentially, Saudi Arabia and Russia have given Western countries the middle finger. Tightening the oil spigot reduces supply and pushes up crude oil prices. Higher oil prices make production and transport costlier and reduce the spending power of consumers.

Pessimism on earnings…

Corporate earnings will occupy center stage as the big banks kick off the new earnings season on April 14. For Q1 2023, the estimated year-over-year earnings decline for the S&P 500 is -6.6%, according to research firm FactSet.

If -6.6% turns out to be the actual decline for the quarter, it will mark the largest earnings decline reported by the index since Q2 2020 (-31.8%).

Pessimism abounds. For Q1 2023, 79 S&P 500 companies have issued negative earnings guidance and 27 companies have issued positive guidance.

Due to increasing recession fears, analysts lowered earnings estimates for the first quarter by a larger margin than average.

The Q1 bottom-up earnings estimate decreased by 6.3% from December 31 to March 30. “Bottom-up” is an aggregation of the median earnings estimates for Q1 for all the companies in the index.

The good news is that the S&P 500 remains above its 200-day moving average…barely. In the coming days, we face an inflection point.

Editor’s Note: Are you hunting for high yields, but you also want to mitigate the sort of risks I’ve just described? Consider my colleague Nathan Slaughter, the chief investment strategist of High-Yield Investing.

For the last 16 years, Nathan has made it his solitary focus to help everyday Americans invest profitably for retirement.

As a high-yield expert, Nathan has devised a simple strategy that could help you generate a steady stream of income, almost like clockwork. Click here for details.

John Persinos is the editorial director of Investing Daily.

To subscribe to John’s video channel, click this icon: