 | AUTHOR: Jason Roque, CFP®, APMA®, AWMA® TITLE: Investment Adviser Rep – CCO TAGS: S&P 500, NASDAQ, FRB, Rates, Oil, Jobs |
The year is starting in the red. Is that reason to think all of 2024 will end up suffering?
Monday S&P 500 -% | NASDAQ -%
Happy New Year!
Tuesday S&P 500 0.57% | NASDAQ 1.63%
GDP expectations for the 4th quarter softened, however that did not deter interest rates from rising. Higher rates means perhaps markets got overzealous with their rate cut expectations throughout the back half of 2023. The Federal Reserve Board (FRB) currently projects three cuts, while markets have been pricing in 6 cuts.
Wednesday S&P 500 0.80% | NASDAQ 1.18%
Mortgage rates rose last week as interest rates began to firm a bit. ISM Manufacturing Data rose but remains contractionary, yet manufacturing remains a light part of our economy. JOLT’s job openings were little changed from the prior month, signaling continued strength in the job market. All this came together to give us another negative day for equities. The data mainly signaled economic strength, which supports a more restrictive FRB.
Thursday S&P 500 0.34% | NASDAQ 0.56%
Initial jobless claims remain low, showing additional strength in the jobs market. Strength in the job market further signals the FRB could be less inclined to cut rates than they expect. Crude inventories fell more than expected, but oil prices still softened. Lowered inventories typically signal price increases as supply comes in under demand, but demand has been softening as well.
Friday S&P 500 0.18% | NASDAQ 0.09%
Happy Jobs Friday! The unemployment rate fell last month from 3.8% to 3.7%. Nonfarm payroll adds were strong at 164K. The strong jobs report further entrenches the idea that perhaps the FRB will only cut rates 3 times in 2024. The ISM Non-Manufacturing Data (Services) came in weak at 50.6. The weaker services data is contrary to that however, signaling an economy that is flirting with contraction.
Conclusion S&P 500 1.52% | NASDAQ 3.25%
Markets recorded a negative weekly performance for the first time since October. It is not uncommon for markets to take a breather every six to ten weeks of advancing. So a nine advance was pretty impressive. There are some that would say that a negative start to the year could signal chaos for all of 2024. You do not have to go very far back to debunk that theory. 2016, SPY (a viable proxy for the S&P 500), fell 3.37% in January. It went on to post a 12% profit on the year. The current market moves are adjustments to the reality of interest rate expectations for 2024. Still look for further adjusting, but likely a reacceleration as the FRB gets more vocal on their anticipated rate moves.
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