March 2024 Monthly Commentary
Greetings, Ladies and Gentlemen, welcome aboard the Wall Street Express, where the ride of 2024 has already begun at breakneck speed. Fueled by AI technology and a favorable economic climate, this train is chugging full steam ahead. With the S&P 500 as our mighty engine, we're hurtling towards record highs, a spectacle not seen in the past five years. In fact, the S&P 500 rose a remarkable 10.16% in the first quarter of 2024, buoyed by 22 record highs to cap off its best first-quarter performance since 2019.
The star of this locomotive show? AI Technology stocks, with Nvidia providing a spectacular show of steam, surging a whopping 82.5% in the 1st quarter of 2024. Other sectors, such as Energy, Financials, and Comm Services are also poised for significant growth in earnings and revenue, indicating sector-specific momentum that could sustain market performance into the future. But mind the gap, dear passengers! Unpredictability lurks in the shadows like a bandit on the tracks. Namely, the path of disinflation has continued to surprise to the upside and has been a bumpy and uneven ride to say the least. The latest Personal Consumption Expenditures (PCE) reading, the Fed’s favored inflation gauge, increased .4% in February vs .3% in January. That said, while interest rates were held steady at a two-decade high of 5.25% to 5.5%, the Fed's trusty travel guide still predicts three quarter-point rate cuts in 2024.
Peering into our oracle's crystal ball, we see a future painted with guarded optimism. Looking ahead, according to Forbes, analysts are currently projecting an additional 6.8% upside for the S&P 500 given continued growth of AI technology, signs the U.S stock market is broadening from the so-called Magnificent Seven of mega-cap growth and technology, and favorable macroeconomic conditions. But remember to keep your eyes peeled for the unexpected bends in the track of Federal Reserve policy adjustments and potential market corrections.
The Federal Reserve's latest meeting was akin to a high-stakes poker game, with Chair Jerome Powell holding his cards close to his chest. The Fed is walking a tightrope, balancing the need to tackle stubborn inflation currently at 3.2% with the desire to keep the economy's engine purring at 2.1% projected GDP growth. Despite the suspense, the Fed's cautious optimism and strategic balancing act suggest a carefully choreographed performance, aimed at ensuring the market continues to steam ahead.
The hum of excitement aboard the Wall Street Express is palpable, with whispers of better-than-expected growth and Fed cuts in the air. But wait, there's a twist in the tale! As GDP estimates rise like coal smoke from our stack, questions abound about potential rate cuts. Why would the Fed put on the brakes when GDP growth is powering ahead? The answer lies in the delicate balance of the economic tracks. The Fed, like a skilled engineer, doesn't want to cause a derailment by squeezing out credit across the economy. In this thrilling journey of Wall Street, the engineers are juggling multiple controls - inflation, liquidity, market returns, and the looming threat of recession. But remember, this journey isn't just about AI and tech stocks. The ride also features strong performances from Energy, Financials, and Comm Services. That’s why diversification is key. Just as a train with multiple cars can offer greater efficiency and capacity compared to a single car, diversification can enhance the potential for returns and mitigate risks by harnessing the strengths of different investments.
And don't forget to find your balance with bonds. The rise in yields has opened a treasure chest of opportunities in fixed income assets. And remember, navigating the Wall Street Express isn't just about going with the flow. We recommend adopting a strategic mix of conservative and growth-focused investments to enhance your chances of achieving maximize returns with the least amount of risk as possible.
So, sit back, enjoy the ride, and marvel at the scenery. The Wall Street Express promises thrills, spills, and financial escapades like you've never seen before!
Onwards, and Upwards, always.
Steven and Daniel
