April Economic Update
Market Summary
Technology stocks slowed, small cap stocks outperformed, and everyone is trying to piece together an increasingly mixed signals being given by the Federal Reserve regarding interest rates. For March, the S&P 500 ticked higher by 3.10%, the Nasdaq 100 Index eased but managed to post a 1.17% gain, and the small cap Russell 2000 index gained 3.39% while remaining within its recent trading range. (1)
March Recap
Last month was a fairly quiet period for markets with only a handful of inflation surprises such as S&P Global US manufacturing prices rising again alongside both the core and headline Producer Price Index (PPI). The Consumer Price Index (CPI) for both core and headline ticked slightly higher than expectations had hoped, both rising only 0.1% but reiterating the recent trend when inflation has been persistently sticky at these levels. (2)
Tensions in the Middle East did not help the matter with crude oil rising 6.14% due to increased uncertainty regarding Iran potentially directly getting involved with the Israel matter in addition to cargo ships avoiding the Suez Canal due to the unrest.
Federal Reserve Mixed Messages
All of the above inflation factors led to increasingly opaque signals to come from the Federal Reserve toward the end of last month and the beginning of April. On March 29, Jerome Powell stated he would use caution before lower interest rates this year due to the lack of progress with getting inflation metrics to move lower. This led to several other Fed officials to begin walking back dovish comments regarding lower interest rates, while other members remained firm that two to three cuts would be coming this year.
Minneapolis Fed President Neil Kashkari, Dallas Fed President Lorie Logan, and Atlanta Fed President Raphael Bostic have all recently stated that if progress with inflation continues to stall, there may not be any interest rate cuts this year. Meanwhile, Cleveland President Loretta Mester and San Francisco President Mary Daly have reiterated their expectations for two to three rate cuts in 2024. This type of division within the Federal Reserve has been rare under Jerome Powell’s tenure since he took the job in 2012 and establishes a new dynamic we will be watching closely in the coming month. (3)
Looking Forward…
The next Federal Reserve announcement will not come until May with the market currently pricing-in less than a 6% probability of an interest rate cut with odds increasing to 46% odds for the Fed’s June meeting. We will likely keep receiving mixed signals regarding rates up until the June decision. (3)
In the meantime, the market will once again to its attention to corporate earnings which reports for the first quarter of 2024 will begin later this week beginning with the banking sector.
Monthly Financial Tip:
Canceling an old credit card may be a bad idea if you have a good credit history. Part of that history is based on how long you have been borrowing, and if that old card has a good history associated with it, keeping it active may be a wise decision.
Citations:
1. WSJ.com, March 29, 2024
2. Investing.com, March 01 & 14, 2024
3. CNBC.com, April 03, 2024
4. CMEGroup.com, April 08, 2024
Disclaimers:
This post has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Bob Lawson is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
