Presented by The PensionmarkMeridien Team, January 24, 2024
Last week was a remarkable one in the financial markets, with the Dow Jones Industrial Average and the S&P 500 notching all-time daily and weekly closing highs. Considering the past week and its interpretations, here is an overview to keep you informed.
S&P 500, DOW ALL-TIME HIGHS
Adding on to the gains from the week before, the Dow Jones Industrial Average and S&P 500 put in another positive week, causing the S&P 500 to break its all-time daily closing high previously set on January 3rd, 2022. Strength was noted in technology stocks, paving the way to the broader market record close.
Overall, the S&P 500 rose by 1.17%1, the Nasdaq 100 added 2.86%2, and the Dow Jones Industrial Average was higher by 0.72%3.
CONSUMER SENTIMENT RISES
According to data from the University of Michigan’s Consumer Sentiment report, consumer confidence has surged4, and data shows the biggest two-month gain since 1991.
This data can be seen as confusing, as many Americans are struggling to make ends meet with necessities like food and shelter at high costs.
Credit card balances are rising5, too, and so are delinquencies. But the data is the data, and it showed the Consumer Sentiment Index came in at 78.8, up 9.1 (13.1%) from the December final reading. The latest reading was above the forecast of 70.0.
RATE CUT EXPECTATIONS SHIFT
Nothing stays the same for too long in the financial markets. Rate cut expectations shifted over the past week, with the probability of a March rate cut sitting at 46.2%6 at the end of the week versus 76.9% one week prior.
Hawkish rhetoric from voting Federal Reserve (Fed) Governor Christopher Waller included a note that while inflation is approaching the 2% target, the Fed should not rush towards rate cuts until it is clearer that lower inflation has been sustained.
Other Fed voting member commentary last week included Atlanta Fed President Raphael Bostic noting that he expects rate cuts to happen in the third quarter.7 Bostic seemed more dovish than Waller.
Voting Fed members speak frequently, and It is helpful to pay attention to the commentary of the other voting Fed members (not just Powell) to gauge Fed sentiment.
The S&P 500 digested the commentary and obviously did not mind it, finishing the week at all-time closing highs even as 10-year note yields ended higher on the week.
TREASURY YIELDS CLIMB
Ten-year note yields were back on the rise last week, adding around 19 basis points to settle near 4.145%.8
The uptick in 10-year note yields last week may show the market’s negative reaction towards rate cuts beginning later than desired and further digestion of recent CPI data. The 10-year yield tends to rise when higher borrowing costs (i.e., higher interest rates) are expected. Despite this, the Dow and S&P 500 still closed the week at fresh all-time highs.
The 2-year note yield also rose last week, adding around 24 basis points to close the week near 4.389%.9 The 2/10 yield curve remains inverted10 – which often signals a recession – although the inversion is well off its steepest levels experienced in mid-2023.
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THE TAKEAWAY
S&P 500 all-time highs: that sums up the broader U.S. economy right now for long-term investors.
Consumer sentiment can be a real riddle, with credit card balances and delinquencies rising. This data illustrates a disconnect between the lives of a large segment of Americans and the associated government data.
But for long-term investors, the “data doesn’t matter” sometimes. Staying dedicated to a disciplined plan has proved to stand the test of time.
As the market seeks a dominating narrative for 2024, we will be keeping our eyes on the effect of Treasury yields on major stock market indexes. Last week saw rising yields, and the major equity indexes not only didn’t mind but surged to the upside.
If you’re considering your options in the current market, rest assured that we are here to help you make confident and clear decisions.
Don’t hesitate to reach out to us anytime with questions or concerns.
The PensionmarkMeridien Team may be reached at 866-871-9963 or meridienteam@pensionmark.com
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Pensionmark Financial Group, LLC (“Pensionmark”) is an investment adviser registered under the Investment Advisers Act of 1940. Pensionmark and WIA Holdings, LLC (“World”) are affiliated through common ownership with Pensionmark Securities, LLC. Securities offered through Pensionmark Securities, LLC (Member FINRA/SIPC).
Please consult your financial professional for additional information.
This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.
Citations:
1. Trading View, January 20, 2024
2. Trading View, January 20, 2024
3. Trading View, January 20, 2024
4. VettaFi Advisor Perspectives, January 19, 2024
5. Quartz January 9, 2024
6. CME Group, January 23, 2024
7. CNBC, January 18, 2024
8 Trading View, January 20, 2024
9. Trading View, January 20, 2024
10. CNBC, January 2024
Pensionmark Financial Group, LLC (“Pensionmark”) is an investment adviser registered under the Investment Advisers Act of 1940. Pensionmark and WIA Holdings, LLC (“World”) are affiliated through common ownership with Pensionmark Securities, LLC. Securities offered through Pensionmark Securities, LLC (Member FINRA/SIPC).