What Happened: Personal Consumption Expenditures (PCE) rose .4% in January, in-line with expectations. S&P 500 finished the week at new all-time high while Small Caps and other interest rate sensitive stocks finally awakened from their slumber.

What Does it Mean? For the last year markets have been led primarily by large cap technology stocks affectionately known as the Magnificent 7. Companies such as Meta & Nvidia have bucked the interest rate headwinds reporting stellar growth primarily due to new and innovative products. While these names have propelled the S&P to new heights, under the surface, most other companies have not been as strong. In fact, despite the 3% rally seen in the Small Caps for the week, the Russell 2000 remains nearly 20% off all-time highs seen back in 2021.

This week it seems as if the general sentiment has changed for these groups as the most interest rate sensitive areas preformed the best, in our opinion, due to the fact that inflation data as noted by the PCE seems to be in-line with expectations and a far cry from the CPI surprise we saw just a few weeks ago.

Why Do we Care? For the bull market to continue we believe it is important to see a broadening of strength in other areas beyond large cap technology. Areas such as small and medium sized companies along with emerging markets or even the bond market for that matter, has not yet gotten the wake-up call that the bull market is in full swing. Should the recent momentum we’ve seen this week continue, we suspect the strength in these areas will be what’s need to draw in some of the sidelined money that remains out of the stock market.

It was a generally quiet week for the market, something we’re not that accustomed to of late, but we’ll definitely take it. Next week the economic data will be back in full swing and give us a better feel for where we may be heading into the spring.

Click HERE to watch Quint’s appearance on the Schwab Network from earlier this week!

 

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