The Financial Quarterly

Despite some inflation worries, markets soared in Q1, driven by optimism about growth and future interest rate cuts.1   Will stocks continue to rise? Is that predicted recession still coming?   Let’s take a look at what happened in Q1 and what might happen next. How Did Markets Perform Last Quarter? S&P 500 10.2% The broader U.S. market closed the best Q1 since 2019.1 NASDAQ 9.1% The tech-focused NASDAQ soared on AI optimism and expected lower interest rates.1 DOW 30 5.6% The blue-chip Dow also grew on renewed investor confidence.1 Looking Ahead What Factors May Influence Markets in the Months to Come? Let’s take a look ahead at some of the factors that we’ll be watching in the weeks and months ahead. Interest rates The Federal Reserve indicated that it expects to lower interest rates in 2024. Optimism about lower rates is likely to fuel market growth. However, if high rates linger, investors may get cold feet.2 Economic data Investors will be closely watching reports on inflation, employment, and other sectors for clues about future Fed moves and the economy’s health. Recession indicators Recession forecasts have abated but come economists think high interest rates could still trigger a recession.3,4 Geopolitics Wars in Ukraine and Israel, attacks on shipping.5 –Markets had a strong start to 2024 and the bulls could still have room to run. Key Takeaways for Savvy Investors What conclusions should we draw from a high-flying first quarter? Investors are feeling optimistic about 2024. With the S&P 500 closing its fifth straight month of gains, it’s clear that the bull market has legs.6 We can also see that the rally is broadening beyond a small number of technology stocks as investors build confidence in the economy.7 Broader confidence in company growth potential is great news for investors as it makes the rally less vulnerable to the individual fortunes of a few high-flying stocks. When will interest rates drop? That’s the big question everyone is asking. Interest rate forecasts are all over the place, with some economists predicting three rate cuts in 2024 and others saying the Fed may not cut rates at all.8 The Fed’s official position is that conditions may support lower rates this year, but economists want to confirm trends in the data before pulling the trigger.9 We likely won’t see action before summer, if not later. Will we still see a recession in 2024? It’s looking less and less likely that a recession is on the horizon. But, it’s clear that the Fed’s high rate policy is still reverberating through the economy. Some economists believe that the Fed is sprinting toward cutting rates to stave off a possible recession in 2025.3 Bottom line: we’re watching the data, staying flexible, and looking for opportunities. Questions about markets or your portfolio? Please click the link below to schedule a chat to discuss. https://calendly.com/chelberg-uwk/15-minutes-zoom-next-day

Sources:

1. https://www.cnbc.com/2024/03/27/stock-market-today-live-updates.html
2. https://www.cnbc.com/2024/03/20/fed-meeting-today-live-updates-on-march-fed-rate-decision.html
3. https://finance.yahoo.com/news/feds-rate-cut-projections-pointing-221015938.html

4. https://www.usnews.com/news/economy/articles/2024-02-20/leading-economic-indicators-no-longer-forecasting-a-recession
5. https://www.blackrock.com/corporate/insights/blackrock-investment-institute/interactive-charts/geopolitical-risk-dashboard
6. https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/stock-rally-extends-to-5th-straight-month-in-march-as-s-p-500-rises-3-1-81057365
7. https://www.reuters.com/markets/us/wall-st-week-ahead-broadening-us-market-rally-gets-boost-dovish-fed-2024-03-22/
8. https://www.thestreet.com/fed/goldman-sachs-updates-when-fed-will-cut-rates-in-2024
9. https://www.statista.com/chart/29055/fomc-projections-for-the-federal-funds-rate/

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