Rowing in a Barrel? | March 22, 2024

AUTHOR: Jason Roque, CFP®, APMA®, AWMA®
TITLE:   Investment Adviser Rep – CCO

Markets barreled ahead last week. Should more be expected or was this just a bounce from two bad weeks in a row?

Monday                      S&P 500 0.63% | NASDAQ 0.82%

NAHB Housing Index came in above 50 for the first time since July of 2023. Markets rose in normal trade to open the week after two weeks of losses. This week should be very meaningful as the Federal Reserve Bank (FRB) meets this week to decide on interest rates. The expectations are for them to leave them unchanged, but their guidance for 2024 will be closely watched.

Tuesday                       S&P 500 0.56% | NASDAQ 0.39%

Building permits rose more than expected in February. Housing starts also gained more than expected. Crude oil inventories fell more than expected. Markets continued to be bullish heading into the FRB meeting.

Wednesday                 S&P 500 0.89% | NASDAQ 1.25%

The FRB held rates unchanged, however they did reference that Quantitative Tightening (QT) could start to slow down come May. They also affirmed that they were still on track for three rate cuts later this year. All this news favors growth stocks as indicated by NASDAQ’s outperformance on the day.

Thursday                     S&P 500 0.32% | NASDAQ 0.20%

Jobless data continued to show a strong jobs market. Existing homes sales expanded more than expected in February as well. Apple (AAPL) was charged in a suit brought by the DOJ for a monopoly in the smart phone market. Markets continued their advance on the week despite the news.

Friday                          S&P 500 0.14% | NASDAQ 0.16%

Markets ended the day mixed, however they both posted above average gains for the week! The market shift WAS led by Artificial Intelligence and a more favorable FRB environment. This lent to an outperformance of Growth stocks for the day and week.

Conclusion                  S&P 500 2.29% | NASDAQ 2.85%

This was the first positive week for markets in three! The major catalyst was an FRB that was not as hawkish as many anticipated. Three cuts for 2024 was preserved, but perhaps more important was that QT was potentially decelerating in May. QT is the process where they allow bonds on their balance sheet to mature, pulling cash out of the economy. The FRB has reduced their balance sheet by $1.4T since March of 2022 using this method. Slowing this process creates financial accommodation that is not as easily visible as an interest rate change. This momentum should carry risk assets in the near run.

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Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long-term holding strategy is the best strategy in any market environment.
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