Boone, NC Financial Advisors
 > 
 > 
 > 
Market Update
Finance 1

February's Economy & Stock Market Update

The first month of 2024 ended up being more of the same from last year.   In January, the Fed kept rates unchanged, the Jobs reports and the labor market remained very strong, and the consumer continued to carry this economy.  For us, the big news was 4th qtr GDP came in at +3.3%, and 2.5% annualized for 2023.  Not bad for an economy that was supposed to be recession.  (We were surprised to see that headline not get more attention).

We are in earnings season right now, and while the majority of companies that have reported have beat expectations, they’ve beat by less than they normally have.  So far, tech has continued to dominate, with names like Amazon, Microsoft, & Meta completely blowing past expectations.

Span out though and this market does feel like it’s looking to catch its breath after a stellar year-end rally.   All 3 major indexes posted slight gains for the month (more on that later) but small caps pulled back sharply while international markets and bonds both declined for the month.  Once again, the S&P Equal Weight index is in negative territory for the year thus far.  I find it hard to believe 2024 will mirror 2023 this closely but right now it feels like déjà vu.

 

Here are the YTD numbers:

performance 0124 | Signature Wealth

Brokered CD Rates

rates 0224 | Signature Wealth

So goes January, so goes the year”.  Have you ever heard that before?  We don’t blame you if you haven’t; it’s not catchy at all.  It is, however, statistically great news:

 

Going back to 1929, if January was a positive month for the markets, then the rest of the year was up 79% of the time.

 

This January was a good one with the S&P finally reaching a new all-time high on January 19th.  That put an end to what had become the 6th longest streak without a new high.  (The previous high was over 2 years ago!)  For those keeping score, so far, the Dow and S&P have created new highs, but the NASDAQ still remains 3% off its all time high. 

 

There are 3 points-of-interest from this:

  1. Small Caps are still in a bear market.  According to Goldman Sachs, whenever the S&P 500 hits an all-time high while small caps are still in a bear market, that has historically proven to be a positive signal for both indexes but even more so for the small caps.  Given that small caps have lagged so dramatically for so long, that would be a welcome, long overdue change.  But make no mistake, large cap stocks still dominate for now.
  2. We were encouraged to see the market gains of the 4th quarter last year broaden out to include other areas besides just the 7 big-tech names, unfortunately January not only reversed that trend but narrowed the concentration even more.  For the month of January, 80% of the returns came from only 3 companies:  Nvidia, Microsoft, & Meta (Facebook).   We really need this growth to broaden out.  Serious investors simply can’t chase tech names, let alone only a handful of tech names.  (We do have to give honorable mention to the Healthcare stocks though; they finally saw some gains in January.)
  3. While headlines, hype, or fear can drive stock prices in the short term, in the long run it’s all about earnings. According to a recent Wall Street Journal report, if you exclude Tesla, the Magnificent Seven Six are projected to report a 62.8% jump in earnings for the fourth quarter. That’s truly incredible and deservedly why they get a lot of attention.  However, the other 494 companies in the S&P 500 are expected to post an -8.6% decline in earnings.  Added together, that’s a total combined earnings growth of 1.6% for the entire S&P 500.  That’s not very impressive.  To put it another way, even though this market continues to climb to new highs, it’s carried on the back of only a few names.  We’ve been highlighting this for over a year now and I’d really hoped we’d have a different narrative by now.

 

Ultimately none of these changes the direction for us as the overall trends remain positive.  The economy is doing better than most expected, inflation continues to come down, the Fed will most likely lower rates at some point this year, and historically, the odds lean in the favor that markets should post positive returns this year.  And most importantly, at some point the markets will broaden out; after all, there’s an old saying “A rising tide lifts all boats…not just the tech ones.”  Or something like that. 

The big football game is this Sunday.  John is picking San Francisco and Vegas odds agree with him at the moment.  I don’t follow either team but if I had to pick one then I’d judge it based on how I make most tough decisions in life: who has the better BBQ.  Kansas City* is famous for their thick BBQ sauce.  I’ve never even heard of San Francisco BBQ and there’s probably a reason for that.  In this case it’s an easy call:  Kansas City. 

            *Note:  While KC is technically on the Missouri state side, we’re splitting hairs here.  As any good Midwesterner can tell you, the state of Kansas claims them just as much as Missouri does.

In next month’s commentary, we’ll put some perspective around the markets during election years as we’re already starting to get those questions from many of you.  

 

Any opinions are those of Sean Bokhoven and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance is not indicative of future results.
This is not a recommendation to purchase or sell the stocks of the companies mentioned.  There is no assurance the trends mentioned will continue or that the forecasts discussed will be realized. Past performance may not be indicative of future results. Economic and market conditions are subject to change. The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 is an unmanaged index of small‐cap securities. The Bloomberg Barclays US Aggregate Bond Index is a broad‐based flagship benchmark that measures the investment grade, U.S. dollar‐denominated, fixed‐rate taxable bond market. An investment cannot be made in these indexes. The performance mentioned does not include fees and charges, which would reduce an investor’s returns. Every investor’s situation is unique, and you should consider your investment goals, risk tolerance, and time horizon before making any investment. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Be sure to contact a qualified professional regarding your situation before making any investment or withdrawal decision. 
Brokered Certificates of Deposit (CDs) purchased through a securities broker and held in a brokerage account are considered deposits with the issuing institution and are insured by the Federal Deposit Insurance Corporation (FDIC), an independent agency of the US, Government. FDIC deposits are insured up to $250,000 per issuer (including principal and interest) for deposits held in different ownership categories including single accounts, joint accounts, trust accounts; IRAs, and certain other retirement accounts. The deposit insurance coverage limits refer to the total of all deposits that an account holder has in the same ownership categories, at each FDIC-insured institution. For more information, please visit fdic.gov. About Liquidity: Funds may not be withdrawn until the maturity date Or redemption date, However, the brokered CD, are negotiable, which mean, that although not obligated to do so, Raymond James and other broker/dealers presently maintain an active secondary market at current interest rates, Market value will fluctuate and, if the CD is cashed out prior to maturity, the proceeds may be more or less than the original purchase price, Holding CDs until term assures the holder of par value redemption. CDs are redeemable at par upon death of beneficial holder. FDIC insurance does not protect against market losses due to selling CDs in the secondary market prior to maturity.
Bond prices and yields are subject to change based on market conditions and availability. If bonds are sold prior to maturity, you may receive more or less than your initial investment. Holding bonds to term allows redemption at par value. There is an inverse relationship between interest rate movements and bond prices. Generally, when interest rates rise, bond prices fall and when interest rates fall, bond prices generally rise.
U.S. government bonds and Treasury notes are guaranteed by the U.S. government and, if held to maturity, offer a fixed rate of return and guaranteed principal value.

Let's Talk...

We understand that navigating the financial landscape can be overwhelming, so we offer a no obligation, complimentary consult.

John Barrier and Lindsay Harrison had an exciting day giving back to the Watagua County community...

Boone and Winston-Salem, NC – We are thrilled to introduce… Lindsay Harrison, Client Services Associate In...