AE Wealth Management: Weekly Market Insights | 2/4/24 – 2/10/24

Weekly Market Commentary

THE WEEK IN REVIEW: Feb. 4-10, 2024

S&P 500 just keeps climbing

How high will the S&P 500 go? The index topped 5,000 for the first time ever last week and has risen in 14 of the last 15 weeks, something it hasn’t done since 1972. It was a mostly calm and quiet week for markets, with one surprise on Monday as activity in the services sector unexpectedly jumped to a four-month high.

Also on Monday, Treasury yields rose following comments from Federal Reserve Chair Jerome Powell on Sunday night’s “60 Minutes” that he saw no need to cut rates immediately. The comments were especially concerning since the interview was filmed prior to the latest jobs report showing we added 353,000 jobs last month. If he was determined to keep rates steady before, a strong jobs report definitely won’t change his mind — and that’s in direct conflict with the market’s narrative of rate cuts happening soon.

If you’re confused about the current state of the economy, you’re definitely not alone. The data appears to be puzzling and conflicting. Jobs are strong, and the unemployment rate has been below 4% for two straight years. Markets are chugging along, and consumers are still … well, consuming. But it all seems to feel a bit tenuous and unsustainable, especially to Americans who say their long-term financial confidence feels fragile and vulnerable to social and political threats.

Many years ago, economist Arthur Okun described the environment as a “high-pressure economy,” which seems an apt description of the current state of things. Pressure can be good; after all, you can’t produce diamonds without pressure. (And some athletes perform best under pressure. Just ask Patrick Mahomes.) But pressure has to go somewhere, or it just continues to build. The only question is when that will happen and what the results will be when it does.

Coming this week

• Several Fed officials are on the speaking circuit this week. They don’t have another meeting for more than a month, leaving lots of time for markets to pick apart comments and speculate about what the Fed could do with rates.
• The latest consumer price index (CPI) data is scheduled for release on Tuesday. CPI is a major measure of inflation, and it has remained stubbornly high for the past year. Analysts are forecasting a slight drop in core CPI (which measures the changes in the price of goods and services minus food and energy) from 3.9% to 3.7%. The latest producer price index (PPI) will follow on Thursday.
• We’ll get lots of housing data late in the week, including the home builder confidence index, housing starts and building starts. Thursday and Friday will also include U.S. retail sales and the latest consumer sentiment reading.

Sources:
https://www.morningstar.com
https://www.cnbc.com
https://www.marketwatch.com
https://www.cnbc.com
https://markets.businessinsider.com
https://ycharts.com

Accessed 02/09/2024

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