Tag: GDP

Quarter 3 Economic Review

Written by support@seostats.com on October 18, 2024. Posted in Newsroom.

This quarters recap: Volatility, climbing indexes, and rate cut

Presented by The PensionmarkMeridien Team, October 18, 2024

As we head into the final stretch of 2024, I wanted to offer an overview of key developments that occurred in the third quarter.

S&P 500: FOUR STRAIGHT POSITIVE QUARTERS

It’s four positive quarters in a row for the broadest measure of the U.S. economy, the S&P 500,with a remarkable seven out of the last eight quarters in the green¹. Long-term investors have been rewarded (and perhaps spoiled a little bit, dare I say!) for the last year or two.

Regardless of the headlines that have come our way for the last eight quarters (think inflation, high interest rates, government shutdowns, etc.), the broader equity indexes continued to climb.

For the third quarter of 2024, the S&P 500 increased by 5.53%,² the NASDAQ 100 rose 1.92%³, and the Dow Jones Industrial Average jumped by 8.21%⁴, as industrials outperformed.

BROAD ECONOMY

Expectations for lower rates combined with declining inflation remain front and center. The Fed highlighted a “recalibration” message at the last policy meeting, tying the rate cut to a need to stimulate the labor markets as opposed to being a response to a struggling economy.

A 50-basis-point cut is in the books, and the number one question on the minds of the investment community is …

SOFT, HARD, OR NO LANDING?

The rate hike cycle appears to be over, and the Fed’s intended consequences of quelling inflation have seemingly come to fruition in the form of a slowing labor market. Simultaneously, we have seen inflation drop over the last three months, according to multiple metrics.

Now, the Fed is looking to thread the needle by adding some steam into the labor market, but not too much and not too little — essentially creating a Goldilocks scenario of “just right.”

A recession remains a possibility. But there aren’t too many talking about a recession to start the third quarter, as the fresh rate cut creates loosened-up lending markets and provides a dose of stimulus into the economy.

With that said, it’s October and an election year, so anything is possible.

INFLATION SOFTER FOR THE THIRD QUARTER

Consumer Price Index: June consumer pricing, released in July, actually fell on a monthly basis, with data showing a 0.1% monthly decrease from May, two ticks lower than the Dow Jones estimate for a 0.1% monthly increase.

July consumer price Index data showed continued cooling for the month, with the annual inflation rate slowing to 2.9%. The interest rate cut case became more likely.

Finally, August Consumer Price Index data revealed a 0.2% increase in monthly CPI, resulting in an annual increase of 2.5% — the lowest annual inflation rate since 2021 and a 0.4% decline from the previous month. These data releases helped cement the inflation-cooling theme as markets waited on the September Fed meeting, which resulted in a 50-basis-point cut.

AUGUST VOLATILITY SPIKE

While the quarter was positive yet again, it wasn’t without some volatility early in the quarter – and what a volatility spike that was. Even more to marvel at was the speed of its dissipation.

The Japanese Yen carry trade⁵ wreaked some havoc on world financial markets in early August. The effects were felt worldwide but were short-lived.

After spiking above $60⁶, the S&P 500 Volatility Index ($VIX) settled the first week of August’s trading near $20.37. This volatility spike will go down in history books.

LABOR MARKET CONCERNS

As mentioned, labor market concerns popped up in a big way in the third quarter. There were substantial revisions to previously reported labor market data to the tune of 818,000 jobs revised downward over the preceding 12-month period.

Looking at the three non-farm payroll prints during Q3, we see:

206,000 jobs were created in June, in line with estimates, but this is when downward revisions began to the tune of 111,000 downward revisions in April and May.
114,000 jobs were created in July vs.185,000 forecast, a sharp slowdown from June data. Unemployment increased to 4.3%, indicating additional slowdown in the labor market as a whole.
142,000 jobs were created in August vs.161,000 forecasted. There was a notable spike in unemployment.

EARLY SEPTEMBER VOLATILITY

In response, there was some more market volatility in early September, but this pessimism was short-lived. The Fed cut rates by 50 basis points, and the worries faded to black in the eyes of major stock indexes again — at least for now.

Labor market concerns are valid, especially when factoring in the revisions to previously reported labor market data. But we’ll see if the medium-term effects of the rate cut result in some strengthening of the employment markets in the fourth quarter.

Could the rate cut result in a pickup in inflation that everyone is feeling is in the rear-view mirror? It’s possible — we will see if the Fed can thread this narrow needle.

FED OUTLOOK

At the end of third quarter, markets were pricing in a 64.7% probability of a 25-basis-point cut and a 35.3% chance of a 50-basis-point cut at the November meeting, per the CME FedWatch Tool⁷.

There is a general consensus of 50 basis points of further rate cuts in 2024, as suggested by Federal Reserve Chair Jerome Powell himself at a September 30th conference at the National Association for Business Economics.

Remember, however, that the Fed is heavily data-dependent, so additional CPI prints will be considered.

TREASURY YIELD NORMALIZATION

After being inverted for the longest period in history (793 days), the 2/10 yield curve finally uninverted/normalized in September. This means that the 10-year yield is once again higher than the 2-year yield at long last.

The 2/10 yield curve normalization has various interpretations, one of which is that it’s a historical indicator of recession. Yet, other interpretations exist.

MOVING FORWARD

The fourth quarter is usually a good one. But it is still a highly Fed-centric market, with an impending election that will have no shortage of headlines and narratives. But, as long-term investors, we look beyond that.

If headlines dictated market performance, long-term investors wouldn’t be in the position they are in today given the headlines over the last couple of years! Food for thought.

With that said, if third-quarter market developments are on your mind or if there is anything else We can help with, please feel free to contact us at the email address or phone number below..

We are always here as a resource for you.

The PensionmarkMeridien Team may be reached at 866-871-9963 or
meridienteam@pensionmark.com

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Citations:

1) Trading View, October 1, 2024
2)Trading View, October 1, 2024
3)CME Group, October 7, 2024
4)Trading View, October 1, 2024
5)Trading View, October 1, 2024
6)CNN, August 7, 2024
7)Trading View, August 11, 2024

Advisory services offered by Pensionmark Financial Group, LLC. Securities offered by Pensionmark Securities, LLC, member FINRA/SIPC. Pensionmark Financial Group, LLC is affiliated through common ownership with Pensionmark Securities, LLC.

Monthly Economic Update: August

Written by support@seostats.com on August 12, 2024. Posted in Monthly Newsletter, Newsroom.

In this month’s recap: Narrative shift, rate cut likely

Presented by The PensionmarkMeridien Team, July 2024

After a strong June, major U.S. equity indexes were mixed in July, indicating some divergence and a potential shift in the narrative to come. So far, in limited trading sessions, August is showing a different tone. This change in tone focused on a cooling economy, which has been the Fed’s plan all along by raising rates. However, nerves exist that a soft landing (cooling the economy without a recession) is no longer as likely¹. Investors anxiously received mixed corporate earnings.

In fact, earnings contributed to some selling in equities, especially megacap tech, towards the end of the month and into the first two trading sessions in August. All the while, value stocks and small-caps (companies with smaller market capitalization) fared quite well in July. Overall, here was the tale of the tape for the month of July: The S&P 500 increased by 1.13%², the NASDAQ 100 fell by 1.50%³, and the Dow Jones Industrial Average rose by 4.41%⁴.

DIVERGENCE FEATURED IN JULY

For an extended period of time, the market narrative has been centered around AI and megacap tech, with names like NVIDIA and META powering major market indexes higher. Well, narratives do change in the financial markets; the shift towards higher dividend-paying blue-chip value stocks and even under loved small-caps came into play as July progressed. But there was nowhere to hide once August got moving, with selling coming in across the board. More on that in a minute!

BE DIVERSIFIED

Early August developments reinforced why a diversified portfolio — having an equity and fixed income portfolio properly constructed based on risk tolerance and other factors — is a must. And while we all know that bonds are not nearly as trendy as a NVIDIA that split 10:1⁵ back in June, it is prudence that makes the bacon for long-term investors. Markets do not go up or down in a straight line, and diversification helps long-term investors weather storms.

EARNINGS INTERPRETATIONS

It’s a busy earnings season, and there has been no shortage of earnings and overall market volatility as of late. Many companies have shown mixed earnings, with some corporations missing the mark on top-line and bottom-line results. Technology stocks were sold heavily at the end of July and into the very beginning of August. We are beyond the halfway point in the earnings season now, and we will see what the rest of it brings, with many tech giant earnings out of the way.

INFLATION COOLING

So, here is the good news: Inflation is cooling. The recent data will factor into the Fed’s September policy meeting, where traders currently see a 100% chance of a rate cut — a 25.5% chance of a 25 basis point cut and a 74.5% chance of a 50 basis point cut.

CONSUMER PRICE INDEX:

Prices are falling, folks. June consumer pricing, released in July, actually fell on a monthly basis, with monthly CPI data showing a 0.1%⁶ monthly decrease from May. This was two ticks lower than the Dow Jones estimate for a 0.1% monthly increase. Great news for the interest rate cut case! Year-over-year, data showed a 3.0% increase — the lowest level in more than three years.

A 3.8% slide in gasoline pricing helped to tame the inflation reading, and even more good news was evident, as shelter and food costs were only 0.2% higher from a month ago. While still sticky⁷, shelter inflation showed some signs of potential cooling, with the lowest monthly jump in three years encouraging interest rate-cutting hopeful bulls.

PRODUCER PRICE INDEX:

After the soft CPI print, we got the June Producer Price Index (PPI), which ran hotter than estimates. Data showed wholesale pricing rose 0.2% in June⁸, higher than the 0.1% Dow Jones estimate. Looking at yearly data, wholesale data for June increased by 2.6%. So, while consumer pricing was lower, the wholesale pricing data was a bit warm — no inflation celebrations just yet! Services pricing contributed to the rise in overall producer pricing, showing a 0.6% monthly gain that accounted for around three-quarters of the overall wholesale pricing gain.

JULY FED MEETING

On the last day of July, the Federal Reserve (Fed) left rates unchanged as expected, keeping the federal funds rate at 5.25% – 5.50%.

The Fed statement included⁹ this note, “Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have moderated, and the unemployment rate has moved up but remains low. Inflation has eased over the past year but remains somewhat elevated. In recent months, there has been some further progress toward the Committee’s 2 percent inflation objective.”

MARKET REACTION

The Fed decision day on 07/31 stimulated investors to bid equities higher as optimism grew surrounding rate cuts to come. Earnings from Meta after the bell on the same day helped to keep a bid under major stock indexes.

However, the buying enthusiasm was short-lived, as August began the next day. It was a volatile week on Wall Street, with the Fed in the rear view mirror and investors reacting to the next morning’s unemployment data, showing the highest level since October 2021.

LABOR MARKET

On the note of softer economic data, let’s dig into the July labor market data release. The month’s labor market data missed the mark in a big way, triggering selling across major stock indexes and lower Treasury yields. Overall, 114,000 jobs were created¹⁰ versus Dow Jones estimates for 185,000.

This result was a big miss, especially given the earnings anxiety investors were coping with heading into the jobs number. However, it did cement the odds for a rate cut to come — this is what the market wanted for so long, anyway!

Moving forward, we’ll see how the market further digests the weaker employment data.

PUTTING IT TOGETHER

Market narratives can change on a dime. July showed divergence in major stock indexes, with investor appetite shifting towards value stocks and under loved small-caps versus megacap tech, which could be interpreted as a shift in narrative and sentiment. Economic data is also showing signs of slowing, which is exactly what the Fed has wanted to see to deliver beloved rate cuts. But now that we have the signs of such cooling, volatility returned as selling accelerated in the first two trading sessions in August.

WHAT TO DO?

After heavy selling to start August, it’s important to remember that volatility is always going to present itself in these markets. Remembering the long-term plan when volatility spikes is essential. Nobody knows how long this new narrative will last, but a diversified portfolio is a helpful way for long-term investors to weather volatility storms.

With that overview noted, as more developments occur, we will keep you apprised of them. As always, if you would like to discuss the current market outlook or explore investment strategies based on your objectives, please feel free to contact me.

The PensionmarkMeridien Team may be reached at 866-871-9963 or
meridienteam@pensionmark.com

Please consult your financial professional for additional information.

Citations:
1. Business Insider, August 2, 2024
2.   Advisor Perspectives, July 31, 2024
3.   NASDAQ, July 2024
4.   Morning Star, July 31, 2024
5.   NASDAQ, July 11, 2024
6.   CNBC, July 11, 2024
7.   CNBC, July 11, 2024
8.   CNBC, July 12, 2024
9.   Federal Reserve, July 31, 2024
10. CNBC, August 2, 2024

Quarter 2 Review

Written by support@seostats.com on July 16, 2024. Posted in Newsroom.

This quarters recap: Inflation cools, eyes on Fed

Presented by The PensionmarkMeridien Team, July 18, 2024

As we enter the second half of 2024, now is the perfect time to review the last quarter.

Overall, bulls continued to run during the second quarter of 2024 as several major stock indexes broke out of recent trading ranges to the upside.

Tallying the quarter, the S&P 500 increased by approximately 3.90%¹, the Nasdaq Composite rose by close to 8.1%², and the Dow Jones Industrial Average decreased by nearly 1.7%³.

ECONOMY

Rewind to the beginning of the year, and the talk of the town was as many as six rate cuts to come this year. Remember that? Well, courtesy of sticky inflation (which has recently shown early signs of potentially softening), the narrative has changed significantly since then.

Current expectations are for one rate cut in 2024, with the Fed’s ability to cut near the presidential election in question.

INFLATION

The year-over-year Consumer Price Index inflation rate declined in Q2, with the last CPI reading of the quarter showing consumer pricing cooling slightly month-over-month in May and year-over-year inflation running at 3.3%. It is too early to say if the trend will continue, as many market bulls desire.

Core CPI (which removes more volatile food and energy from the metric) dropped to a three-year low of 3.4% in May, potentially bolstering the case for rate cuts down the line. This metric illustrates just how much the necessities of food and energy contribute to the inflationary pressures here in America.

U.S. equities loved seeing inflation metrics tick lower throughout the second quarter, and the S&P 500 continued to make fresh all-time highs.

LABOR MARKET

Labor markets remained mostly steady to higher throughout Q2, with payroll gains (206,000 in June, 272,000 in May, 175,000 in April) in each month and June and May data beating analyst consensus expectations.

For June, the unemployment rate rose to 4.1%, higher than the estimated 4.0% and the highest level since November 2021. The unemployment rate has inched higher each month for the past three months, potential signs that the Fed’s rate hike crusade has dampened the U.S. economy. You wouldn’t know it by looking at the S&P 500!

QUARTERLY FED EXPECTATIONS

The second quarter featured two Federal Reserve (Fed) policy meetings. The Fed left rates unchanged both times, in line with market expectations. The result is a current target overnight lending rate of 5 – 5.25%.

More importantly, the Fed has set expectations that it will cut rates only once in 2024.

In the third quarter, there will be two Fed meetings: July 31st and September 18th. As of early July, markets were pricing a 93.3% probability of no rate cut in July and a 70.8% probability of a 25-basis-point cut in September, per the CME FedWatch Tool⁴.

PRE-ELECTION RATE CUT DEBATE

Even with a 70.8% probability of a Fed rate cut at the September meeting, much controversy surrounds such a cut, as some market participants argue that a cut could bolster the economy and show potential favoritism to the incumbent. This will likely remain a topic of discussion as the time remaining until Election Day ticks down.

TREASURIES

Courtesy of slowing inflation data and Fed rate cut expectations, Treasury yields fell in the second quarter by more than 30 basis points from their April peak, ending the quarter near 4.37%.

As a result, holders of bonds have seen some well-deserved price appreciation since April. The Morningstar Core Bond Index gained 0.17%⁵ for Q2, and high-yield bonds tacked on 1.07% for the quarter, with the longer end of the curve lagging the shorter-term counterparts.

GENERATIONAL OPPORTUNITY IN BONDS?

It has been a rough patch for bond investors, to say the least, but there is hope!

Is it so bad that it is good? Some experts say yes. It has been 46 months since the bond market made an all-time high.

Looking at the Bloomberg US Aggregate Bond Index’s largest drawdown periods from 1976-2024, we can see that this drawdown has reached extreme levels. Should inflation continue to decelerate or decrease, it could be a time when smart money looks to bonds, given the value proposition.

Not as trendy as AI-fueled stocks, bonds do stand the test of time, and there is ample math that supports these fixed-income assets. Some food for thought entering the third quarter!

FORGOTTEN YIELD CURVE INVERSION

The longest yield curve inversion in U.S. history passed the two-year mark on July 7th. Seemingly forgotten as of late, the abnormal phenomenon has historically portended economic contraction or recession, but those who have banked on that thus far have missed a large rally in equities.

It is election season, so anything is possible moving forward.

WALL STREET WISDOM DEBUNKED

The classic Wall Street adage of “Sell in May and Go Away” did not transpire in the second quarter — for the second year in a row!

That’s right. Despite the higher interest rate environment, an inverted yield curve, and seasonality, the S&P 500 was positive for two out of three months in the second quarter. After declining by 4.16% in April, the S&P 500 added 4.80% in May and 3.47% in June, a solid quarter⁶ for the broad market average.

Tech and artificial intelligence (AI) continue to outperform the broader market, and AI-fueled gains were a prevailing narrative once again in the second quarter.

TECHNOLOGY STRENGTH, MATERIALS & INDUSTRIALS LAG IN Q2

On the subject of AI and tech, below is the overall performance of the technology sector in the second quarter, along with other popular stock sectors and how they fared in Q2 2024.

Technology: +11.40% in Q2 2024.
Basic Materials: -5.88% in Q2 2024.
Communication Services: +9.16% in Q2 2024.
Consumer Cyclical: -1.20% in Q2 2024.
Utilities: +4.48% in Q2 2024.
Industrials: -3.41% in Q2 2024.

DIVIDEND STOCKS LAG IN Q3: TURNING POINT AHEAD?

With the ten-year yield near 4.268%⁷ and, of course, the two-year yield higher at around 4.624%⁸, it is not rocket science why blue-chip dividend-paying stocks have lagged as their trendier tech and AI counterparts have caught massive inflows of investor cash.

But those who have been around the markets for a while know that trends can be temporary, and U.S. giants like Coca-Cola, Disney, and 3M, for example, have stood the test of time and will not be going anywhere anytime soon.

Should interest rates decline, as many expect, dividend-paying stocks could once again come back into favor. We see that defensive sectors like utilities did well in the second quarter — perhaps a sign of things to come.

More food for thought for those seeking further portfolio diversification heading into Q3.

FROM Q2 TO Q3: A SUMMARY

Of course, much attention will continue to be paid to inflation data and Fedspeak. The Fed has broadcast its intentions for one rate cut in 2024, with the CME FedWatch Tool showing current expectations for one in September. The presidential election later this year adds an element of uncertainty to trying to “time” an interest rate cut.

But, putting those two things aside, portfolio diversification and a long-term focus have been the ticket for ages. Some active participants may seek to look outside of tech and AI in Q3 to reduce portfolio volatility, be first in line to some dividend-paying blue chips, and perhaps find happiness in the beaten-up bonds/fixed-income products.

Diversification is the ticket to being a successful long-term investor; timing the market is very difficult, and diversification is much easier. Moreover, remaining focused on the long term allows an investor to avoid getting caught up in quickly changing narratives that could trigger emotional decisions.

With that overview noted, if Q2 market developments are on your mind or if there is anything else we can help with please email or call us at the phone number of email address below.

The PensionmarkMeridien Team may be reached at 866-871-9963 or
meridienteam@pensionmark.com

Please consult your financial professional for additional information.

Citations:

1) Statmuse, 2024
2) Statmuse, 2024
3) Statmuse, 2024
4) CME Group, July 12, 2024
5) MorningStar, July 1, 2024
6) YCharts June 2024
7) Trading View July 8, 2024
8) Trading View, July 8, 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).

Monthly Economic Update: July

Written by support@seostats.com on July 16, 2024. Posted in Monthly Newsletter, Newsroom.

In this month’s recap: June a boon for U.S. equities

Presented by The PensionmarkMeridien Team, July 2024

Overall, diversified, long-term equity investors were in command throughout June as the recent rally continued amid hopes for rate cuts. Signals of inflation easing were evident in various economic data reports scattered throughout the month.

MAJOR STOCK INDEXES

The recent stock market rally has been centered around the technology and artificial intelligence (AI) theme. Tech & AI giant NVIDIA has continued to propel broader averages, including the S&P 500 and NASDAQ 100, higher.

For the month of June, the S&P 500 added 3.47%¹, the NASDAQ 100 tacked on 6.18%², and the Dow Jones Industrial Average rose by 1.12%³.

PAYROLL WHOPPER

The employment report for May, released in June, showed a surprising increase in job numbers, with 272,000 new jobs created⁴, surpassing the estimated 190,000. This was a significant jump from the 175,000 jobs added in April.

There was a brief pause in the bullish market activity on the day of the data release (June 7th) ahead of the then-upcoming Federal Reserve meeting.

The recent job gains were primarily seen in the healthcare, government, and leisure and hospitality sectors, in line with ongoing trends. This trend signals a strong economy and raises questions about the timing of any potential interest rate cuts.

SUPPORTIVE U.S. INFLATION DATA

June brought wonderful news for rate-cut-hopeful bulls, with inflation-busting optimism in full swing.

CONSUMER PRICE INDEX:

As usual, markets were hyper-focused on the Consumer Price Index (CPI) data release. May’s month-over-month pricing showed no increase, and there was a 3.3% increase from a year ago, both below market expectations. The Core CPI, which excludes food and energy prices, rose by 0.2%⁵ compared to April, falling below the predicted 0.3%. The annual core CPI rate unexpectedly decreased to 3.4% from 3.6% in April, below the anticipated 3.5%. Stock bulls loved the news.

The S&P 500 and Nasdaq 100 reacted positively to the softer inflation data and traded near all-time highs. The Dow 30 didn’t follow suit, but their average dividend yield was around 1.99%⁶ as of June 29th.

PRODUCER PRICE INDEX:

With consumer pricing showing some signs of normalization in June, attention turned to producer pricing.

For May, the Producer Price Index (PPI) for final demand unexpectedly fell by 0.2% on a monthly basis, contrary to expectations of a 0.1% increase. This is positive news for those watching for potential interest rate cuts. Core PPI (which excludes food and energy) remained unchanged in May, falling below the expected increase. Year-over-year, Core PPI decreased to 2.3% in May⁷, below the estimated 2.4%.

QUOTE OF THE MONTH

Image of Blue quotation mark with white quotation marks inside

The expert at anything was once a beginner

—Helen Hayes

FED MEETING, REACTION, & OUTLOOK

As anticipated, the Fed decided to keep rates unchanged at its June policy meeting and hinted at taking a more aggressive stance on future Fed interest rate policy.

In terms of future rate cuts, the Fed has indicated that it is considering one rate cut in 2024.

“We believe that policy is restrictive. And we believe that if you maintain policy at a restrictive level, you will eventually see a real weakening in the economy,” Powell stated. “So, our stance has always been that, ever since we raised rates this much, we have always been open to the possibility of cuts at some point.”

“While we are not ruling out the possibility of rate hikes, no one considers it as the most likely scenario,” Powell added.

Given the softer inflation data and the Fed’s signal of a potential cut in 2024, it seems like a solid backdrop as we head into the second half of the year.

TREASURY YIELDS STEADY/QUIET IN JUNE

Treasury yields were slightly lower in June versus May, with thewidely monitored 10-year Treasury Note Yield closing the month near 4.342%⁸ — about 17.3 basis points lower than May’s closing level of 4.515%.

Market participants are constantly calculating probabilities for Fed rate cuts, with the latest data to close June showing a 10.9% probability of a rate cut at the July 31st meeting and a 63.4% chance of a rate cut⁹ at the following meeting on September 18th.

The steady to slightly lower rates during June were welcome news for mortgage borrowing activity, with the average 30-year fixed mortgage closing the month of June close to the psychologically important 7% level¹⁰.

The housing market seems to be in the midst of a shift in many locales as inventory has been growing.

THE TAKEAWAY

May featured a resumption of the rally for major stock indexes, solid corporate earnings overall, slightly lower interest rates, varying economic data, and a Fed that should be supportive going forward as long as inflation cooperates.

As June began, the S&P 500 was working off a monster rally on the last day of the month. Was it month-end books squaring or perhaps a sign of what is to come in June? We will find out as the month unfolds.

With that monthly overview noted, if you have questions or needs arise, feel free to reach out anytime at the phone number or email address listed below. We are always here as a resource for you.

The PensionmarkMeridien Team may be reached at 866-871-9963 or
meridienteam@pensionmark.com

Please consult your financial professional for additional information.

Citations:
1. Trading View, June 28, 2024
2.            Trading View, June 28, 2024
3.            Trading View, June 28, 2024
4.            CNBC, June 7, 2024
5.            CNBC, June 12, 2024
6.            SlickCharts, July 30, 2024
7.            CNBC, June 13, 2024
8.            Trading View, July 1, 2024
9. CME Group, July 3, 2024
10. Mortgage News Daily, July 3, 2024

Monthly Economic Update: June

Written by support@seostats.com on June 7, 2024. Posted in Monthly Newsletter, Newsroom.

In this month’s recap: S&P 500 has best May since 2009

Presented by The PensionmarkMeridien Team, June 10, 2024

U.S. MARKETS

Stock index investors were in command throughout May as the major stock indexes resumed their rallies after consolidating in April.

With the major U.S. equity market indexes resuming runs that began back in November, now is the perfect time to inform you about the latest developments over the course of last month. Below is the latest.

S&P 500: RALLY RESUMPTION

The broadest measure of the U.S. economy clawed back all of the consolidation from April and closed at a fresh monthly closing high¹ in May, marking six out of the last seven months in the green¹. Overall, the S&P 500 had its best May since 2009. Long-term investors will take that to the bank!

For the month of May, the S&P 500 added 4.80%², the NASDAQ 100 tacked on 6.28%³, and the Dow Jones Industrial Average was higher by 2.30%⁴.

TECH LEADS S&P 500

Tech led in May, with Microsoft, Apple, Nvidia, Alphabet, Amazon, and Meta accounting for 76%⁵ of the index’s total gains of the month.

Specific strength was seen in information technology towards the end of the month. Overall, the information technology sector showed investors a very solid earnings season, as earnings growth was the third highest among the 11 S&P 500 sectors.

The S&P 500 information technology sector is led by chip giant Nvidia Corp, Broadcom, Fair Isaac and Company, Super Micro Computer, and other tech powerhouses.

FED MEETING, REACTION, & OUTLOOK

The Federal Reserve kept the federal funds rate unchanged at 5.25% – 5.50% during the May 1st meeting, as expected.

The Fed statement said⁶, “The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”

As traders and money managers digested the May 1st mood of the Fed, the S&P 500 was slightly lower at the day’s close⁷. But markets like catalysts, and the Fed meeting turned out to be the low for the S&P 500 for the month.

Powell also hinted that a rate hike would not be the next move from the central bank. Markets liked hearing that! But what would the tone of the Fed and investors be as the month progressed?

QUOTE OF THE MONTH

Never apologize for burning too brightly or collapsing into yourself every night. That is how galaxies are made.

—Tyler Kent White

EARNINGS SURPRISES

After the Fed meeting catalyzed a May 1st low in the S&P 500 for the month, attention shifted back to Q1 earnings season — and for good reason.

As of May 31st, with 98% of S&P 500 companies reporting earnings results 78% of S&P 500 companies have reported a positive earnings per share (EPS) surprise⁸, and 61% of S&P 500 companies have reported a positive revenue surprise.

First quarter S&P 500 earnings growth was heavily concentrated among five names: NVIDIA, Alphabet, Amazon.com, Meta Platforms, and Microsoft.

The solid Q1 earnings season provided a boost to the overall backdrop in equities as markets battle continued inflation and elevated interest rates.

CONSUMER MOODS

According to the University of Michigan Surveys of Consumers, inflation concerns have caught up with consumers⁹.

The most recent survey indicated that consumer sentiment dropped by about 13%⁹ in May compared to April, following three months of minimal change.

The result may have been fully expected by many, as inflation continues to be sticky and affects Americans.

But, later in the month, the next set of consumer tracking data, showing consumer confidence, told a different story. The data, closely watched after the previous sour consumer number, showed consumer confidence improving for the first time in four months.

The index increased to 102.0 this month from April’s upwardly revised 97.5, surpassing the forecast of 96.0.

It seems we are seeing some mixed messaging on the consumer.

MIXED INFLATION DATA, MARKETS CHEER

Consumer Price Index (CPI):

Speaking of the consumer, all eyes were peeled on the heavily anticipated monthly CPI data.

Consumer inflation in April eased, with the monthly CPI data showing a 0.3%¹⁰ increase from March, slightly lower than the 0.4% Dow Jones estimate. Year-over-year, data revealed a 3.4% increase, in line with estimates.

Core CPI (which excludes more volatile food and energy prices) was very encouraging, showing a year-over-year 3.6% increase, the lowest reading since April 2021. It’s safe to say that market bulls loved this aspect of the report!

The markets responded positively to the consumer inflation data, with the S&P 500 reaching a record-high close¹¹ on the same day. What more could we ask for? Treasury yields also traded lower throughout the day after the data release.

Producer Price Index (PPI):

The day before CPI data was released, April PPI data showed wholesale pricing rose by 0.5%¹² in April, surpassing the 0.2% estimate from Dow Jones. Yearly data revealed a 2.2% increase, marking the largest gain in a year.

Similar to CPI, the rise in overall producer pricing was influenced by services pricing, which saw a 0.6% monthly gain and accounted for about three-quarters of the overall wholesale pricing increase.

Core PPI, which excludes volatile food and energy, also rose by 0.5%, exceeding the estimated 0.2% increase.

Following the data release, stock index futures remained nearly flat, causing some uneasiness in anticipation of the next day’s CPI data. However, stocks eventually rose on the day, setting the stage for the CPI report the following day, which ultimately met the expectations of equity market bulls.

Personal Consumption Expenditures (PCE):

Rounding out May’s inflation data releases, the freshest piece of inflation data was delivered on the final trading day of May in the form of Core PCE.

The Fed’s favorite inflation gauge cooled in April, with Core Personal Consumption Expenditures showing a rise of 0.2% in April, versus estimates of 0.3%. This is what folks wanted to see. The S&P 500 rallied heavily towards the end of the final trading day of May.

STRONG LABOR MARKET DATA

The April employment data, released on May 3rd, showed an increase of 175,000 payrolls for the month, falling short of the estimated 240,000. Surprisingly, this was seen as good news, as the first nonfarm payrolls “miss” since November 2023 could strengthen the case for a potential cut in interest rates.

This “bad news is good news” report gave stock market bulls reasons to be optimistic, as there was hope for softer upcoming inflation data. Later in the month, some of those hopes were realized.

The unemployment rate increased slightly to 3.9% from 3.8% in March.

FED & THE FUTURE

The latest data to close May showed a 99.9% probability of the Fed leaving rates unchanged at the June 12th meeting and a 14.5% chance of a rate cut¹³ at the following meeting on July 31st.

The highest probability for a first rate cut surrounds the September 18th meeting, with a 53.9% chance of a rate cut at the end of May.

THE TAKEAWAY

With that monthly overview noted, if you have questions or needs arise, feel free to reach out anytime at the phone number or email address listed below. We are always here as a resource for you.

The PensionmarkMeridien Team may be reached at 866-871-9963 or
meridienteam@pensionmark.com

Please consult your financial professional for additional information.

Citations:

Trading View, June 1, 2024
Trading View, June 1, 2024
Trading View, June 1, 2024
Trading View, June 1, 2024
Forbes, June 1, 2024
Federal Reserve Bank of New York, May 30, 2024
Trading View, June 1, 2024
Factset, iMay 31, 2024
University of Michigan Survey of Consumers, May 3, 2024
CNBC, May 15, 2024
CNBC, May 15, 2024
CNBC, May 14, 2024
CME Group, June 2024

Monthly Economic Update: May

Written by support@seostats.com on May 8, 2024. Posted in Monthly Newsletter, Newsroom.

In this month’s recap: Earnings, sticky inflation fuel markets

Presented by The PensionmarkMeridien Team, May 8, 2024

After a strong March, major U.S. equity indexes retreated in April. Rising Treasury yields were a prevalent theme for much of the month, while attention turned to corporate earnings and the Fed meeting at the end of the month.

Here is the tale of the tape for the month of April: The S&P 500 ($SPX) declined by 4.16%¹, the NASDAQ 100 fell by 4.46%² ($NDX), and the Dow Jones Industrial Average ($DJI) decreased by 5.00%³.

S&P 500 MAKES IT 5 FOR 6

U.S. stock indexes have been good to investors in 2024, even with several headwinds in play.

So, a mild breather in April is OK, with the S&P 500 and NASDAQ 100 breaking five-month winning streaks and having their first down month since last October. Markets don’t go up or down in a straight line, but we will take the five-month streak.

INFLATION DATA MIXED

The most recent monthly inflation data metrics implied a mixed picture. Here’s the latest.

CONSUMER PRICE INDEX (CPI):

March’s CPI increased by 0.4% month-over-month and 3.5% year-over-year (YoY)⁴, hotter than expected. The figures exceeded Dow Jones’ survey expectations of 0.3% and 3.4%, respectively.

The prior month’s CPI reading was 3.2% YoY. Its rise to 3.5% was significant, causing broader markets to fall; the S&P 500 lost about 1%, and the Dow lost 422 points⁵ on the day of the data release. Inflation certainly has not disappeared.

This most recent release marks three consecutive months of monthly 0.4% increases in CPI. CPI is still running hot.

The report highlights some shocking figures regarding car insurance costs. Car insurance has increased by 2.7% month-over-month and 22.2% year-over-year. Similarly, shelter prices have increased by 5.7% from last year, and transportation costs have also risen. In plain English, everything seems to be getting more expensive. Here is a handy cha rt⁶ showing the latest inflation data on various goods and services.

PRODUCER PRICE INDEX (PPI):

Post-CPI data, markets experienced a bit of relief after the release of March’s Producer Price Index (PPI) data. The PPI data showed that wholesale pricing increased by 0.2%⁷ on a monthly basis, which was slightly lower than the expected increase of 0.3%. It was a welcome change after February’s report showed a significant increase of 0.6%⁸.

However, on an annualized basis, March’s PPI rose by 2.1%, which is the highest level since April 2023. Despite this, the S&P 500 managed to recover around 80% of its losses from the previous day’s Consumer Price Index (CPI) data, closing up 0.8%⁹ on the day of the PPI data release.

Although the PPI data was not bad, the market’s reaction seemed to be a bit too enthusiastic. Buyers came into a few tech stocks, allowing the Nasdaq Composite to reach a new record high. Amazon also reached a new all-time high on the same day. There are different ways to analyze inflation data, such as excluding shelter and autos. However, many analysts will focus on the fact that inflation data has been firming over the past three months

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FEDERAL RESERVE MEETING RESULTS

As expected, the Federal Reserve (Fed) left interest rates unchanged at the May 1st meeting, keeping the federal funds rate at 5.25% – 5.50%.

The Fed statement said, “The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”

Well, we haven’t gotten that type of inflation signal yet, as recent inflation metrics have run between 2.8% and 3.5% (Core PCE/CPI). So, rate cut hopes have been further suppressed based on the recent commentary.

Federal Reserve Chair Jerome Powell also hinted that a rate hike would not be the next move from the central bank.

QUOTE OF THE MONTH

“In times of stress, the best thing we can do for each other is to listen with our ears and our hearts and to be assured that our questions are just as important as our answers.”

—Fred Rogers

MARKET REACTION

The market reaction to the Fed commentary and subsequent Q&A session on May 1st was noteworthy and perhaps slightly ominous. Initially, upon the release of the Fed statement, major U.S. equity indexes rose steadily after being quiet for most of the day. The buying continued when Powell said it was unlikely that the next move would be a rate hike.

But around 3 p.m., the buyers dried up, and the S&P 500 gave back all the daily gains on the Fed statement and press conference and finished in the red for the day. Should we blame the algorithms? Perhaps traders were not too happy about the Fed’s continued message of “higher for longer” with no rate cuts in sight. Markets will be looking to the next batches of inflation data to find reasons to cheer.

TREASURIES / INTEREST RATES

While the Fed left the overnight Federal Funds rate unchanged, interest rates continued to rise in open markets during April, as traders and investors continued to reduce Fed rate cut probabilities for this year.

Higher yields were prevalent across the yield curve. 2-year yields crossed and settled above the 5% level to end the month, closing April near 5.039%¹⁰.10-year notes fared similarly, closing the month of April near 4.685%¹¹, a gain of around 48 basis points for the month.

An everyday impact of higher yields is higher interest rates, namely for mortgage loans. As such, 30-year mortgage rates rose in April, too — with the average 30-year mortgage rate at 7.41% as of May 2nd, according to Mortgage News Daily.

LABOR MARKET DATA: BAD NEWS IS GOOD NEWS

April employment data and market reaction struck a different tone than in recent months. The data, released on May 3rd, showed payrolls increasing by 175,000¹² for the month versus estimates of 240,000.

Bad news, right? Not this time! The first non-farm payrolls “miss” since November 2023 was welcome news for markets, as it shows a cooling in the economy — giving rate cut hopes a fresh injection of enthusiasm. Major U.S. stock indexes rallied steadily in the hours following the data release.

Inside the report, job strength was evident in health care, social assistance, and transportation/warehousing. The unemployment rate ticked up to 3.9% versus the 3.8% level in March.

The “bad news is good news” report gave Fed-watching stock market bulls reasons to cheer. Perhaps the softening labor market could next translate to softer upcoming inflation data — that is what the bulls want!

CRYPTOCURRENCY FALLS

In the final week of April and heading into the May 1st Fed meeting, cryptocurrency markets fell, with the largest cryptocurrency by market cap, Bitcoin, falling below the $60,000 level.

For the month of April, Bitcoin fell close to 16%, as investors seemed to look for an off-ramp before the Fed meeting.

Multiple factors can be attributed to BTC’s decline in April. Notably, the outlook for the Fed to cut rates has been decreasing while interest rates have risen in the open markets, reducing the appeal of Bitcoin to many investors.

The ten largest U.S. spot bitcoin ETFs experienced significant capital outflows in the final week of April.

EARNINGS EXPLOSION

It’s a busy earnings season, and there is no shortage of earnings volatility in individual stocks.

Megacap tech earnings have been robust overall thus far, with Alphabet (Google) and Microsoft posting better-than-expected results for the first quarter, featuring heightened AI spending.

For Alphabet, results beat analysts’ estimates with rising profits in its cloud division. Plus, the first-ever dividend was announced: 20 cents per share to be paid on June 17th to stockholders of record as of June 10th.

Tesla showed investors weak quarterly numbers but improved guidance, sending the stock on a run post-earnings announcement.

Meta Platforms (Facebook) shares were punished on AI spending commentary and data, even as the quarterly numbers beat expectations and the company experienced 27% year-over-year revenue growth.

PUTTING IT TOGETHER

So, what to make of the current picture of the economy? It’s macroeconomics versus corporate earnings right now. Inflation has persisted, and rates have risen — a tough environment for many Americans. The Fed is still in a pickle and walking a fine line.

The AI spending theme should continue to support fund flows into megacap tech, while smaller market capitalization counterparts may continue to lag due to higher costs of capital.

As always, keeping you informed is our top priority. When developments occur, we will keep you apprised of them.

In the meantime, if you would like to discuss the current market outlook and explore investment strategies based on your objectives, please don’t hesitate to contact us.

The PensionmarkMeridien Team may be reached at 866-871-9963 or
meridienteam@pensionmark.com

Please consult your financial professional for additional information.

Citations:

Trading View, April 30, 2024
Trading View, April 30, 2024
Trading View, April 30,2024
CNBC, April 10, 2024
CNN, April 10, 2024
CNBC, April 10, 2024
CNBC, April 11 2024
CNBC, March 14, 2024
Barrons, April 11, 2024
Trading View, April 30, 2024
Trading View, April 30, 2024
CNBC, May 3, 2024

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1st Quarter Economic

Written by support@seostats.com on April 8, 2024. Posted in Newsroom.

In this month’s recap: S&P 500 has best Q1 since 2019

Presented by The PensionmarkMeridien Team, April 8, 2024

Stock market bulls were on parade during the first quarter of 2024, as the major U.S. stock indexes continued to extend gains from the final quarter of last year.

With the books closed for the first quarter, I wanted to take this opportunity to offer an update on key developments.

S&P 500: BEST Q1 SINCE 2019

The S&P 500 found its way to its best first quarter since 2019, extending recent gains to a five-month win streak¹.

The large-cap index and best gauge of the U.S. economy found strength early in the quarter via the AI theme, with NVIDIA contributing to the second consecutive positive quarter for the S&P 500. Some broadening into other sectors was a topic late in the quarter, with the energy and communication sectors finding buyers.

Overall, for the first quarter of 2024, the S&P 500 increased by 10.16%², the Nasdaq 100 rose by 8.49%³, and the Dow Jones Industrial Average saw a rise of 5.62%⁴.

SOFT, HARD, OR NO LANDING?

Soft, hard, or no landing – the question remains whether the Federal Reserve will be able to pull off its inflation-fighting campaign without a recessionary impact.

U.S. stock market bulls cheered the first quarter as investors gained more confidence in a “soft landing” (tamed inflation but no recession) amid inflation moderation. The prospect of perhaps “no landing” (no recession but persistent inflation) was also considered.

INFLATION MIXED FOR Q1

Costs of goods and services are still rising annually, albeit at a slower pace than the peak of the recent inflation cycle.

Metrics were mixed⁵ in the first quarter, with consumer inflation picking up in January (December data), easing in February, and then rising in March.

The last Consumer Price Index (CPI) release of the first quarter showed a 3.2% rise⁶ year-over-year versus 3.1 % expected. Inflation is still running hotter than the Fed’s 2% target rate, but the market wants rate cuts.

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DATE	TIME	LOCATION	TOPIC
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LABOR MARKET

Labor market resilience, based on government nonfarm payroll data, persisted throughout Q1. First-quarter data showed solid payroll gains (216,000 in December, 353,000 in January, and 275,000 in February) with all three months beating analyst consensus expectations.

The data releases have been strong, indicating economic strength but the initial figures are not quite conducive to the market’s desire for rate cuts. Downward revisions have come to the rescue somewhat.

“Downward revisions” essentially means changes to the initial data releases in subsequent months. Data shows that the initial numbers have been revised lower for 10 of the last 12 months⁷.

Such revisions can help to bolster the case for Fed rate cuts, indicating a less strong labor market.

UNEMPLOYMENT RATE

The unemployment rate also showed a mixed picture for the first quarter. However, there was a notable tick higher in unemployment in the last monthly data⁸ release of the quarter, which showed unemployment sitting at a one-year high of 3.90%.

FEDERAL RESERVE (FED) SUMMARY & OUTLOOK

The first quarter featured two Fed meetings, with the Fed leaving rates unchanged in January and March. The result is the same current target overnight lending rate of 5.25 – 5.50%, a 23-year high.

While the Fed left rates unchanged at the most recent March meeting, the Fed did let us know that three 25-basis-point cuts are expected by the Federal Open Market Committee in 2024 via its Summary of Economic Projections (SEP⁹).

Markets loved Federal Reserve Chair Jerome Powell’s commentary at the post-meeting press conference, as all three major stock indices jumped to record high levels. However, on the last day of the quarter, Powell reiterated¹⁰ that the Fed needs to see more good inflation readings before it is ready to cut rates.

At the end of the first quarter, markets were pricing a 95.8% probability of the Fed leaving rates unchanged at the May 1st Fed meeting and a 63.6% chance of a rate cut¹¹ at the following meeting on June 12th.

One thing we know for sure is that those percentages will change each day.

WHAT IF THE FED DOESN’T CUT RATES?

Anything is possible. Market watchers were looking for six cuts; now, it has been whittled down to three for 2024. Yet, major U.S. stock indexes have risen while the number of cuts expected declined.

Cutting rates with the economy running hot would defy conventional wisdom, and the “this time is different” narrative can be cause for concern for many veteran investors.

It’s an election year, and the dynamics are multifaceted. We will see what future inflation and job data look like.

WHERE IS THE PULLBACK?

It’s been quite a while since a meaningful pullback in the S&P 500.

Market sentiment was very high in Q1, and what could potentially or ultimately be deemed a rate-cutting delusion is still alive and well, helping to fuel the gains of major U.S. stock indexes.

Nobody can definitively know what will happen with the Fed cutting rates or what the interest rate markets will do on their own.

Market pullbacks are healthy in bull markets, and there hasn’t been one in a prolonged period. Such corrections are more common than most people think.

CRYPTO RISE & VOLATILITY

It was a wild quarter in crypto, with Bitcoin rising 65% in Q1, fueled by spot ETF buying and concepts of tighter supply in Bitcoin coming in April’s halving event.

“The rise in Bitcoin ETFs, coupled with the transformation of Grayscale’s Bitcoin Trust (GBTC) into an ETF structure, has led to a significant surge in assets under management (AUM) for Bitcoin-related investment products,” said¹² Ronen Cojocaru, CEO at 8081.

To begin the second quarter of trading, the mood of the crypto markets soured, and volatility was on full display as the U.S. dollar gained strength, helping to spur selling across many cryptocurrencies.

The prospects of Ethereum ETFs¹³ continue to be discussed.

LONG-RUN PLANNING

If you asked someone well versed in finance three years ago, “What would the stock market do if interest rates went from sub-1% to over 5% in three years”?

Certainly, the overwhelming answer would have been for stock market declines during the rise in rates. These markets tend to defy conventional wisdom time after time; this is why long-term investing is a lifelong commitment with the fruits of time bearing themselves as a result of investor discipline.

With the above quarterly recap noted, we would love to hear how things are going for you. If first-quarter market developments are on your mind, or if there is anything else we can help with, please feel free to email or call us at the number or email address listed below

We are always here as a resource for you!

The PensionmarkMeridien Team may be reached at 866-871-9963 or
meridienteam@pensionmark.com

Please consult your financial professional for additional information.

Citations:

1) Yahoo Finance, March 27, 2024
2) Trading View, April 1, 2024
3) Trading View, April 1, 2024
4) Trading View, April 1, 2024
5) Trading Economics, 2024
6) CNBC, March 12, 2024
7) Market Watch, March 8, 2024
8) Trading Economics, 2024
9) The Conference Board, March 20, 2024
10) AP News, March 29, 2024
11) CME Group, April 2024
12) International Business Times, April 1, 2024
13) FX Street, April 2, 2024

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Monthly Economic Update: April

Written by support@seostats.com on April 4, 2024. Posted in Monthly Newsletter, Newsroom.

In this month’s recap: U.S. equity indexes spring ahead

Presented by The PensionmarkMeridien Team, April 3, 2024

Stock index investors were in command throughout March as the recent rally continued and showed signs of broadening to other sectors. As a bonus, the recent stock index rally was fueled further by a Federal Reserve (Fed) that sounded dovish, or accommodating, on interest rate policy.

With the major U.S. equity market indexes continuing their runs since November, now is the perfect time to inform you about the latest developments over the course of the last month.

MAJOR STOCK INDEXES

The recent stock market rally started to broaden out in recent days — great news for long-term investors. Strength was seen outside of megacap tech stocks, with S&P 500 sectors like energy and perhaps under-loved financials, utilities, and materials posting solid gains in March as consumer discretionary stocks lagged.

Market bulls were also cheering the prospects of a more accommodating and rate-cutting Fed later this year, and they were bolstered by Federal Reserve Chair Jerome Powell’s comments on monetary policy, further catalyzing gains for the month. For the month of March, the S&P 500 added 3.10%¹, the NASDAQ 100 tacked on 1.17%², and the Dow Jones Industrial Average rose by 2.08%³.

FED RATE DECISION & OUTLOOK

The Fed left interest rates unchanged at its March policy meeting, in line with market expectations. More important than the rate decision itself: the Fed’s tone on the future direction of monetary policy, inflation, and interest rates. Powell’s post-meeting commentary was deemed dovish by the market at large.

Market reaction to the Fed commentary during the post-meeting press conference was bullish and was on full display, as all three major stock indices jumped to record-high levels. The Fed will continue to monitor inflation readings to ensure they move towards the 2% Fed target as the markets digest recent warmer-than-expected inflation readings (PPI & CPI).

According to the Fed’s Summary of Economic Projections (SEP), three 25-basis point rate cuts are now expected for 2024.

WARMER U.S. INFLATION READINGS

The overall trend for inflation saw some heating up in March, as both consumer and wholesale pricing came in a bit hot.

CONSUMER PRICE INDEX (CPI):
The most recent CPI data released in March (February data) showed inflation running hotter than analyst expectations. The report⁴ revealed a 0.4% increase in monthly CPI for February and a 3.2% increase compared to the same period last year.

Dow Jones estimates had predicted a 0.4% monthly gain in February and a 3.1% year-over-year increase. Prices of goods and services are still elevated — we don’t need government data to let us know. But most analysts are looking for the overall inflation-cooling trend to continue.

PRODUCER PRICE INDEX (PPI):
Wholesale pricing rose 0.6%⁵ in February versus Dow Jones economist estimates of 0.3%. That’s double the forecast and gave market participants food for thought. Year over year, prices increased by 1.6%, the biggest move since September 2023.

Core PPI, which excludes food and energy, increased by 0.3% for the month, compared to the estimated 0.2% rise. Stock indexes reacted to the downside for a day or two upon the data release but found their footing quickly.

PERSONAL CONSUMPTION EXPENDITURES (PCE) INDEX:
The freshest piece of inflation data for March came out on Good Friday, with the U.S. markets closed in observance of Good Friday. Data⁶ showed pricing rising in line with expectations, with prices rising 2.8% annually and 0.3% versus one month ago. This data should keep expectations for a Fed rate cut in June in play.

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GLOBAL INFLATION EASING SIGNS

So, why doesn’t the stock market get spooked when inflation data comes out hot like it did in March? Well, that is open to interpretation. We do know that inflation metrics are lagging indicators; they measure the previous month, and markets are always looking ahead.

Looking at Europe, we see that their inflation metrics have recently fallen from an annual rate of 10.6% at its peak to just 2.6% in a recent reading. Compared to the U.S.’s peak year-over-year inflation of 9.1%⁷ (June 2022), the eurozone has experienced even more inflation volatility. Canada’s inflation cooled also, down to 2.8% in February. Other countries are showing signs of inflation easing.

QUOTE OF THE MONTH

“Instead of worrying about what you cannot control, shift your energy to what you can create.”

—Roy T. Bennett

STRONG LABOR MARKET DATA

The jobs report released on March 8th showed more job gains, with 275,000 jobs created⁸ vs 198,000 forecasted. Unemployment rose to 3.9% versus 3.7% forecasted.

“There’s no new thing under the sun between this report and last month’s report. It doesn’t really give us a whole lot of information, other than we can qualitatively say, we’re still growing jobs at a good pace and wages are still a little bit higher than we would like,” said Dan North, senior economist at Allianz Trade Americas.

TREASURY YIELDS STEADY/QUIET IN MARCH

Treasury yields were steady or slightly lower in March versus February, with the widely monitored 10-year Treasury Note Yield closing the month near 4.205%⁹. This was about 4.5 basis points lower than February’s closing level near 4.251%.

Market participants are figuring out the probabilities for Fed rate cuts, with data to close March showing a 95.8% probability of the Fed leaving rates unchanged at the May 1st Fed meeting and a 63.6% chance of a rate cut at the following meeting on June 12th.

The steadiness in rates during March was welcome news for mortgage borrowing activity, with the average 30-year fixed mortgage closing the month of March under the psychologically important 7% level. The quiet yields are also a supportive backdrop for long-term investors in U.S. equities.

MIXED CONSUMER DATA

The resilient American consumer marches on! After enduring two years of escalating prices, the U.S. consumer finds a way. For March, consumer health metrics were on the mixed side. Retail sales rebounded from January’s levels and grew by 0.6% in February¹⁰, but they were below economist expectations.

The University of Michigan’s Consumer Sentiment survey also fell short of expectations¹¹ in the initial release. However, the final version of the consumer sentiment data released on the last trading day of the month showed a rise in consumer sentiment.

So, it was a mixed bag for the consumer last month. Unsurprisingly, consumer debt has piled up as inflation has worn on, with data showing a smooth $1 trillion¹² in interest payments in one quarter alone. That said, while many data releases show a strong consumer, let’s remember that the consumer is loaded up with debt and is paying interest on that debt at a rather elevated rate.

THE TAKEAWAY

March featured a continuation of the rally that started in November, which began with excitement surrounding AI, steadier interest rates, solid economic data, and a Fed that should be supportive going forward. Now, the rally appears to be showing signs of broadening to other sectors, which is a healthy signal. This is one reason that a diversified portfolio is a must.

The market expects three rate cuts in 2024 beginning, as the Fed wants to see further evidence that inflation has cooled sufficiently before cutting rates. The data suggests three cuts in 2024, which is supportive of that expectation.

With that monthly overview noted, if you have been considering your options in the financial markets or have questions, please feel free to reach out anytime.

We are here as a resource for you.