What Happened: S&P 500 posts strongest first-quarter performance since 2019

What Does it Mean? Despite the more than $6 Trillion in cash on the sidelines, the stock market has managed to continue to climb a wall of worry notching a double digit return for the quarter. Despite headlines such as increasing debt levels, election uncertainty, war in Ukraine and a myriad of other concerns, equities have scoffed at this uncertainty marching ever higher day after day.

Why Do We Care? Markets are known to be forward-looking indicators, often pricing in what may be coming around the corner, unseen to the naked eye. While we can only speculate what the current stock market may be trying to predict, in our opinion it continues to come down to interest rates. The Federal Open Market Committee (FOMC) has continued to stand by their projections of 3 cuts in 2024, which we think would help the stalling housing market as well as interest rate sensitive companies such as small caps or industrials. It is our opinion that the market is beginning to price in these cuts as well as more in the future. Our goal is to ride this wave until the money on the sidelines is sucked back into the market at higher prices. At that point it will be time to re-evaluate our bullishness.

 

What HappenedCore PCE – Personal Consumption Expenditures was reported in-line with expectations

What Does it Mean? Personal Consumption Expenditure (PCE) is the preferred method by which the Fed measures inflation. Recently, numbers such as PCE or Consumer Price Index (CPI) have been reported hotter than expected insinuating inflation may be rearing its ugly head once again. Friday morning’s PCE report, however, came in, in-line at .3%, giving us further evidence that inflation may not be headed back up, but rather continuing its downward trend.

Why Do We Care? While the markets are closed for Good Friday, we suspect this would have given further life to equities, specifically the areas most interest rate sensitive. The more evidence we receive regarding the downward trend for inflation the more confident we will feel in the Fed’s future rate cuts. These two things combined have been a positive for stocks, which we believe is what may keep the bulls running.

Make no mistake, however, we are long overdue for a correction. Two weeks ago, it looked as if this would be starting but was postponed after fresh bullish news from Alphabet, formerly Google, which served to spark a new market advance. At some point the selling will stick and the pullback will create a new opportunity for those on the sidelines to re-enter.

Due to continued conflict with China, many companies have been working hard to readjust their manufacturing. This week Quint sat down with CNBC to discuss this and look at a few companies doing just that.

 

Until next time

~ Quint

 

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