At the start of 2024, Wall Street demonstrated its resilience, experiencing a rapid rise driven by a strong economy, potential interest rate cuts, and advancements in artificial intelligence. Major indices like the S&P 500 (1) and Nasdaq (1) surged, reaching record highs. The first quarter ended on a high note, with the S&P 500 hitting its peak in two years. The Federal Reserve’s positive outlook hinted at three interest rate cuts by year-end, while Treasury yields rose slightly. Despite minor setbacks for some mega-cap stocks, overall market performance was strong, with most sectors seeing gains exceeding 10%. (2) Fluctuations were observed in the U.S. dollar, while gold prices reached all-time highs and crude oil prices soared. Mortgage rates and gasoline prices rose, impacting consumer spending. March continued the bullish trend, with key indices recording over 3% gains. (2) However, inflationary pressures increased, prompting attention from the Federal Open Market Committee. Despite volatility, jobless claims remained remarkably stable.
As we move into the second quarter, the job market remains strong, with unemployment staying below 4% and wage growth above 4%. However, this week, we saw higher-than-expected inflation, which has stayed persistently above the Federal Reserve’s target rate of 2%. Despite this, GDP from the fourth quarter of 2023 remained robust at 3.3%. (2) The economy’s resilience and the persistent inflation are giving the Federal Reserve little incentive to cut interest rates, and the market is now pricing out the possibility of a rate cut in June. There’s been increased issuance of Treasury bonds to refinance maturing bonds and finance new spending. This heightened supply of bonds, coupled with tepid demand, will likely put upward pressure on bond yields. The 10-year Treasury yield has risen above 4.5%, reminiscent of the period from August to November 2023 when yields briefly touched 5% on October 19th before retreating once the Fed signaled a dovish pivot. While we can’t be sure that this situation will unfold similarly,
Looking ahead, the focus will be on election campaigns, corporate earnings, and geopolitical tensions, with investor attention on when long-anticipated Fed rate cuts will occur. It’s crucial to maintain a diversified portfolio and seek opportunities to invest capital and rebalance portfolios accordingly.
Thanks for your continued trust,
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1. NASDAQ and S&P 500 – are unmanaged groups of securities considered to be representative of the stock market in general.
2. https://www.broadridgeadvisor.com/fmaweb/Newsletters/MarketSummaries.aspx?iplf=np
This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. Comments concerning the past performance are not intended to be forward-looking and should not be viewed as an indication of future results.
