Weekly Market Commentary – The bull market is alive and well.

The Markets

The bull market is alive and well.

“We know what investors are thinking,” reported Jacob Sonenshine of Barron’s. “The gains can keep coming, driven by an economy that is neither too hot nor too cold…The economy is growing, but only moderately, and the Federal Reserve can keep thinking about when it can start cutting interest rates…This dynamic is why nobody wants to miss out on the rally—and why they think it can keep going. A recent survey from Investors Intelligence shows the number of bulls outnumbered their bearish counterparts by the widest margin since late 2021.”

Recent market performance owes much to:

• Solid earnings growth and strong corporate profits. Last week, 97 percent of the companies in the Standard & Poor’s 500 Index had shared how well they performed in the fourth quarter of 2023. Overall, blended earnings for companies in the Index grew 4 percent year-over-year, exceeding expectations. Blended net profits were stable at 11.2 percent year-over-year, reported John Butters of FactSet.
• Slowing Inflation. Last week, one of the Fed’s favorite inflation gauges, the personal consumption expenditures (PCE) price index, showed inflation moved lower year-over-year. Prices rose 2.6 percent over the 12 months through December 2023 and 2.4 percent over the 12 months through January 2024. While inflation trended lower over the longer period, it increased month-to-month. In December 2023, prices rose 0.1 percent, and in January 2024, prices rose 0.3 percent.
• Enthusiasm for artificial intelligence (AI). Investors expect AI to boost productivity and corporate earnings. “Innovations in electricity and personal computers unleashed investment booms of as much as 2% of U.S. GDP as the technologies were adopted into the broader economy. Now, investment in artificial intelligence is ramping up quickly and could eventually have an even bigger impact on [economic growth],” reported Goldman Sachs.

Last week, the Standard & Poor’s 500 and Nasdaq Composite Indices closed at record highs, while the Dow Jones Industrial Average retreated. All three indices finished February with gains, reported Chuck Mikolajczak of Reuters. The U.S. Treasury market rallied with yields falling for all but the shortest maturity of Treasuries.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable. 

PRINTING HOUSES ON THE MOON.

For decades, Star Trek and its many spinoffs told tales of space travel. In that fictional universe, the Starfleet explored space at the behest of an interstellar government following the rules and laws of that government.
For many years, actual space exploration fell under the purview of governments, too. However, that has been changing. Today, space is a rapidly growing private sector endeavor. Estimates suggest the private space industry could be valued at $770 billion by 2027, reported Reuters.
In the next decade or so, we may see:

• Direct-to-device satellite programs. “Integrating satellite and terrestrial mobile networks could unlock new revenue for the satellite, semiconductor, and telecom industries,” wrote David Jarvis and colleagues in Deloitte Insights. “…this technology does not compete with terrestrial cellular services from mobile network operators. It provides limited connectivity in areas where there is no terrestrial cellular coverage.” (Extraterrestrial service is not yet available.)

• Growth of the Low Earth Orbit (LEO) economy. An early area of growth in the space economy is expected to take place 99 to 1,200 miles above the Earth in what’s known as LEO. According to Deloitte, “…the industry can be dissected into six broad market segments that encompass specific commercial activities.” The segments include infrastructure, services, on-orbit research and development, on-orbit manufacturing, space tourism, and media, entertainment and advertising.

• Habitable communities on the moon by 2040. “In the vast expanse of the cosmos, a visionary dream is becoming a reality: homes on the moon, an audacious endeavor spearheaded by NASA. This cosmic ambition…is now hurtling towards reality, fueled by cutting-edge technology, innovation, and unyielding determination…Imagine houses emerging from the moon’s surface…crafted from the very rock chips and mineral fragments that define the moon’s rugged terrain. How, you may understandably ask? With 3D printers,” reported Architectural Digest.

The growing space industry will create opportunities for investors – and for new graduates who can pursue careers related to space in the private industry, as well as within governments.

Weekly Focus – Think About It  

“Live long and prosper.”

—Dr. Spock, Fictional Star Trek character

Sincerely,
Your Team at Wellspring Wealth

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