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The Market Down & Dirty

Updated: 1 day ago

February 20, 2024                    


The Data

U.S. equities mostly declined for the first time in 5 weeks.

  • S&P 500 -0.34% Dow -0.11% Russell 2000 +1.16%, Nasdaq -1.34%.[1] 

  • The All-Country World Index rose +0.31%.1

S&P 500 sub-sectors were mixed last week.

  • Energy, Materials, & Utilities led to the upside.1

  • Tech led to the downside by a wide margin with a loss of over 2.5%.1


The CBOE Volatility Index (VIX) rose 10% to close below 14.24. 1

 

US Treasury bond yields moved higher across the curve last week.

  • US 2yr +0.16% at 4.64%, 10yr +0.13% to 4.30%, 30yr +0.08% to 4.45%.1

  • Inflation measures rising in January has caused rate cut bets to decline and rates to rise.


Commodities as an aggregate asset class were slightly higher last week.

  • WTI Crude gained +3.07%.1

  • Gold declined -0.54%.1

  • The US Dollar index rose +0.15%.1


In our opinion, U.S. economic data was mixed last week.

  • The Producer Price index jumped 0.5% in January which blew past expectations. 1

  • Consumer Sentiment improved for the 3rd straight month.1

  • New home construction sank by the most since the Covid pandemic.1

 

An index of equities outside the US (FTSE All-World ex-US) rose +0.93%.1

 

Conclusion

Equity markets were mixed around the globe with the major US benchmarks posting losses for the first time in over a month.

  • The Nasdaq underperformed on the back of some large constituents showing weakness.

  • The small-cap tracking Russell 2000 posted over a 1% gain on the week and was the only major US index to end the period in positive territory.

  • Additionally, equal-weight S&P 500 finished the week flat while the widely followed market-cap S&P was negative.


US interest rates moved higher across the curve again last week.

  • The latest producer price index data came in at +0.5% while expectations were for only a gain of +0.1%.

  • This gave additional juice to rates moving higher at the same time when expectations for Federal Reserve rate cuts declined.

  • While starting the year anticipating almost 7 rate cuts from the Fed this year, market participants are now only expecting 3 in 2024.

  • A shift of inflation expectations is impacting confidence in all measures of analysis by wall street participants.

  • We believe if inflation was to continue to trend higher, significant volatility in equity, bond, commodity, & currency markets would follow as most investors did not have that on their “bingo card” for 2024.


S&P 500 sector performance was mixed last week as year-to-date winners were deeply negative.

  • Energy led to the upside on crude’s strength over the last couple of weeks.

  • Non-US equities moved higher last week despite the US Dollar also gaining ground.


The 4-year synchronization among major global central banks could be about to weaken.

  • While the Fed is anticipated to hold fast with still high inflation & a strong US labor market, the European Central Bank is on the verge of cuts to avoid recession while the Bank of Japan is looking at its first interest rate hike since 2007 in the coming months.

  • This would add another layer of uncertainty to the global economic environment.

Earnings season is winding down as actual results are giving investors little to worry about.

  • S&P 500 companies are on track to post 7% year-over-year earnings growth.

  • Despite this, cautious tones are prevalent in forward guidance as only 40% of provided earnings outlooks exceeded analysts’ expectations.

  • Even lower was the share of companies issuing higher than expected profit forecasts which stands at only 21%.

 

 

Justin Greenhill - Chief Investment Officer – justin@sollinda.com           

Ryan A. Mumy, CFP®, AIF® - CEO – ryan@sollinda.com   

Phone:  844/662-1211


[1] Source: Bloomberg – 1/19/2024

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