The stock market is off to a strong start, adding on to the late 2023 rally. Through March 8, the S&P 500 is up over 7%. The equal-weighted S&P 500, which might be a better measure of the average stock, is up nearly 5% and the Dow Jones Industrial Average is up a bit more than 3%. Like last year, the market is top-heavy, with a few stocks accounting for an outsized portion of the gains.
There are signs that the performance is starting to even out, however. Some of the big technology stocks that did so well last year have pulled back a bit recently, while other “under the radar” names are catching up. In my mind, that is a healthy development for most investors.
The 10-year US Treasury bond yield is up from the end of 2023, although it has pulled back from February highs. Short-term rates are nearly flat as bond traders wait for more signals from the Federal Reserve about interest rate cuts.
The market of stocks, bonds, and just about everything else really had strong performance in late 2023 as investors were planning on early 2024 interest rate cuts by the Fed. Economic news has come out in 2024 indicating that the economy is very strong, which has pushed back hopes for an interest rate cut until mid- or late 2024. That is still our base case–that the Fed will start to reduce its rate this year. We are becoming more and more hopeful of a “soft landing,” wherein the economy slows but doesn’t stall. This would be an ideal scenario for the economy, consumers, and stock investors. There may be a “scare” along the way that growth is too hot, resulting in a market pullback. We’ll reevaluate then, but it might present a great opportunity to add to stock investments.
For now, my indicators are neutral. There are more positives than negatives, but the market has priced that in. I recommend that investors stay allocated in-line with their financial plan recommendation. Don’t be alarmed by “weapons of mass distraction,” as Chip likes to say. We all will likely get bombarded by TV news, ads, and robocalls ahead of this year’s election, and I doubt that many of the messages will be positive. Good news doesn’t sell well. I also advise that investors don’t let their own political views distort their investment decisions. Remember that the plans we put together are based on decades of data and account for many different political environments. Furthermore, recent stock market performance has shown that stocks can be resilient through all sorts of regimes.
March 29 is Good Friday and a stock market holiday, so many advisors will be taking the day off. Very importantly, tax returns are due on April 15. If you plan to make a 2023 contribution to an IRA, SEP, or 529 plan, time is running out. Also, almost all tax reports have been mailed out to our clients. There are still some stragglers (we have to wait for companies to provide information to us before we can send it to you), but if you find that you are missing anything, please let us know.
