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2020 Financial Markets Update

Week in Review: March 29, 2024

April 1, 2024

Recap & Commentary

Markets ended the holiday-shortened week with the S&P 500 at a new record high. For the quarter, the S&P 500 gained 10.2%, its best first quarter since 2019. According to Barron’s, since 1950, when the S&P 500 has gained 10% or more in the first quarter, 91% of the time the index has finished the year higher. While the data is based on a relatively small sample size of just 11 observations, it does suggest that a strong start to the year doesn’t necessarily resign investors to losses over the remainder of the year.

Given the strength of equity markets thus far in 2024, especially following last year’s gains, investor angst about the possibility of a pullback is understandable. While there are a number of reasons for heightened investor angst- extended valuations, slowing growth, heightened geopolitical tensions, stubborn inflation- the overall backdrop for equities arguably remains supportive. Consumer spending continues to be resilient; earnings growth is  expected to improve over the course of 2024; inflation is trending in the right direction though the rate of progress has decelerated; and the Fed remains committed to rate cuts in 2024.

This upcoming week will provide additional insight into the Fed’s thinking regarding future rate cuts, with the release of the March FOMC meeting minutes. In addition, March employment will be reported. Despite strong initial reports, recent months have seen significant downward revisions to prior months, raising questions about the underlying strength of labor markets, something that bears watching in the upcoming report.

Economic Commentary

Core PCE, the Fed’s preferred inflation gauge, rose 0.3% in February, in line with expectations, but down from January’s upwardly revised 0.5% reading. Goods prices increased 0.5% after outright declines the previous four months, while services prices rose 0.3%, just half of January’s increase. Year over year, prices increased by 2.8%, slightly lower than January’s 2.9% increase.

Elevated prices aside, multiple data sources last week pointed to a still resilient consumer. The PCE report showed that spending remained strong during the month increasing 0.8%, well ahead of expectations for a 0.5% increase. Spending on services rose at a 0.9% pace in February, the largest monthly increase since mid-2021. Personal incomes continued to lag spending rising 0.3%, slightly lower than the anticipated 0.4% increase. Earlier in the week the latest revisions to Q4 GDP were released, increasing growth to 3.4% from the previous estimate of 3.2%.  Consumer spending was a primary contributor to the upward revision, moving from 3.0% to 3.3% growth during the quarter. Continued willingness by the consumer to spend heavily on services is likely to help stave off predictions of an imminent recession but should do little to support cooling prices in the sector.

US consumer sentiment rose more than anticipated in March to 79.4, the highest level since July 2021. One-year inflation expectations fell 0.1% since February, to 2.9%.  Five-year expectations fell to 2.8%, from 2.9% a month ago.

Of Note

Sam Bankman-Fried, co-founder of the now-defunct crypto exchange FTX was sentenced to 25 years in prison and ordered to pay $11B in forfeiture to the US government for defrauding customers of ~$10B.

Market Indices   (As of 03/29/2024)

S&P 5000.4%
Small Caps2.5%
Intl. Developed-0.1%
Intl. Emerging0.4%
U.S. Bond Market0.2%
10-Year Treas. Yield4.21%
U.S. Dollar0.0%
WTI Oil ($/bl)$83.12
Gold ($/oz)$2,255

The Week Ahead

  • March Employment Report
  • JOLTs Job Openings
  • ISM Manufacturing
  • ISM Services
  • Weekly Jobless Claims

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