Weekly Market Commentary

The Markets Inflation and geopolitics and earnings. Oh, my! It was a rough week for stock markets. “The S&P 500 closed 1.5% lower on Friday, while the Nasdaq Composite dipped 1.6%. Every S&P 500 sector closed lower—and just about 40 stocks in the index finished the day with gains,” reported Connor Smith of Barron’s. A trio of issues caused investors to reassess their expectations for the year. Here’s what many were thinking about: Prices rising at home. Early last week, the Consumer Price Index showed prices had moved higher in March. Headline inflation was 3.5 percent year-over-year, up from [...]

The Markets The bull charged from October 2023 through March 2024. Last week, it took a breather. Optimistic may be the best word to describe the first quarter of 2024. From the start of the year, investors were confident that an economic soft landing in the United States was possible. The U.S. stock market reflected investors’ conviction that: The U.S. economy would continue to demonstrate resilience; Inflation would continue toward the Federal Reserve (Fed)’s target; and The Fed would eventually lower the federal funds rate, pushing borrowing costs down and boosting economic growth. Over the first quarter, the Standard [...]

The Markets What do dieters have in common with the Federal Reserve? If you’ve ever dieted, you may be familiar with the weight-loss plateau. Many people experience steady progress. The bathroom scale moves lower week by week – until it doesn’t – and that can be discouraging. The Federal Reserve has been trying to reduce inflation, and it has had significant success. Its actions are credited with bringing headline inflation from a peak of 9.1 percent in June 2022 to 3.2 percent in February 2024, as measured by the Consumer Price Index. Looking back over the last few months, [...]

The Markets The central banks have spoken. No one expected the United States Federal Reserve to announce a rate change last week – and it didn’t. But Fed Chair Jerome Powell’s comments and the actions of other central banks led to new records being set in stock markets around the world, reported Randall Forsyth of Barron’s. “…the world’s central banks, led by the U.S. Federal Reserve…have all but green-lighted lower policy interest rates in coming months in the expectation that inflation will continue to make downward progress without triggering recessions. The Fed’s counterparts at the European Central Bank and [...]

The Markets Here’s the tea on stock markets and presidential elections. Last week, a slew of headlines mentioned stock market bubbles and frothy valuations. The implication was that markets might be headed lower because they’ve risen so high. Last Wednesday, Lewis Krauskopf of Reuters reported: “Some market participants believe the relentless U.S. stock rally is poised for a breather, even if it remains unclear whether equities are in a bubble or a strong bull run. The benchmark S&P 500…is up over 25% in the last five months, a phenomenon that has occurred just 10 times since the 1930s, according [...]

The Markets The week got off to a good start... In testimony before House and Senate committees, Federal Reserve (Fed) Chair Jerome Powell noted that prices had been falling and unemployment rates remained quite low. As a result, he expected the Fed to begin lowering the federal funds rate in 2024. “I think we’re in the right place,” he said. “We’re waiting to become more confident that inflation is moving sustainably at two percent. When we do get that confidence—and we’re not far from it—it’ll be appropriate to begin to dial back the level of restriction so that we [...]

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 [...]

The Markets Optimism abounds! Enthusiasm for everything related to artificial intelligence (AI) drove a global stock market rally last week. Equity markets in the United States, Europe, and Japan hit all-time highs after a leading chipmaker reported better-than-expected earnings and an extraordinary surge in demand for its artificial intelligence-targeted processors, wrote Rita Nazareth of Bloomberg. Investors took the news “as evidence that the generative AI boom is both real and spreading. [The company’s] spectacular earnings report and forward guidance are spurring investors to buy shares of almost any company with a stake in the AI race—everything from computer and [...]

The Markets Don’t fight the Fed. The Federal Reserve (Fed) is the central bank of the United States. A longstanding bit of investment wisdom is: Don’t fight the Fed. It means that investors should align their strategies with the Fed’s monetary policy. Economic growth is influenced by Fed policy, and stock markets tend to reflect the economy, rising when it grows and falling when it contracts. As a result, Kent Thune of The Balance reported, when the Fed is: Tightening monetary policy by raising the federal funds rate to slow economic growth, investors should be cautious. Easing monetary policy [...]

The Markets China is out of favor with investors. For decades, China was among the fastest-growing economies in the world. Its real gross domestic product, which is the value of all goods and services it produces, grew by about nine percent a year, on average, from 1978 through 2022, according to The World Bank. However, the pace of economic growth in China slowed over the last decade and dropped sharply during the pandemic. Many investors expected China to rebound quickly in 2023 after its Zero Covid policy ended, but that hasn’t happened. Instead, “Exports weakened and deflation deepened, but the big letdown [...]