2024 1st Quarter Investment Management
Market Scorecard
S&P 500 rose by 10.6%
Nasdaq 100 tacked on 2.9%
Dow Jones Industrial Average increased by 1.97%
Bloomberg U.S. Aggregate Bond Index down 0.8%
The Fed and Interest Rates
As expected, the Fed left rates unchanged at the last policy meeting. According to Fed Chairman Powell, the Fed will continue to seek confirmation that inflation readings are moving toward the 2% Fed target. Inflation as measured by the Consumer Price Index was 0.4 percent in February and 3.2 percent over the past year. Core inflation, which leaves out volatile food and energy prices was also 0.4 percent for the month and 3.8 percent over the last year. While the trend is downward, inflation continues well above the target rate, thus leaving the Fed maintaining the current federal funds rate.
The Labor Market
The good news for the economy is that March employment data showed larger than expected job growth. Non-farm payrolls increased by 303,000, 50% more than the anticipated 200,000. As a result, unemployment fell to 3.8% from 3.9% previously and GDP grew by 2.5% in Q1. This is another factor underscoring why the Fed is not in a position to cut rates too soon.
Three Rate Cuts in 2024 According to “Dot Plot”
The Fed’s dot plot, which consists of anonymous data from the 19 officials that comprise the Federal Open Market Committee (FOMC), indicated that the committee has penciled in three quarter-point cuts in 2024. This is down from an anticipated six rate cuts at the beginning of the year.
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There are only six Fed policy meetings left in 2024, so these projected rate cuts would have to start happening soon. The Fed meets again in May with another in June. A rate cut in May is off the table given the recent jobs report. The question is whether upcoming inflation data will cooperate and enable the Fed to initiate rate cuts.
At the end of last week, probabilities favored the first Fed rate cut occurring at the June Fed meeting, with a 75.6% probability, according to the CME FedWatch Tool.
The Magnificent Seven
At In 2023 the Magnificent Seven, Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla, as a group grew over 100% in 2023, significantly outperforming the S&P 500 index which rose 24%. These stocks had gains ranging from nearly 50% to well over 200%!
In movies the western genre has long since passed and comic book super heroes are the current standard bearer. So too with stocks, as the Magnificent Seven is no more and the latest and greatest is now the Fantastic Five. Dropping out of the group were Apple and Tesla, with declines of nearly 11% and almost 30%, respectively in Q1. The Fantastic Five were all positive, with four of them notching double digit gains just in the first quarter.
This meteoric rise in their valuations has pushed the concentration of the top ten stocks in S&P 500 to a 50-year high of 32%, as reported by JPMorgan. This concentration risk gives rise to quicker and deeper downward movements in the market should there be a reversal in momentum for these stocks.
WE ARE HERE FOR YOU
The New Year provides many great opportunities to get a financial plan in place or reevaluate your risk profile. The Platt Wealth Management team is here for you to discuss any changes or new milestones in your life. We are always available to assist you with any financial matters and we look forward to continue to serve you along your financial journey.
Warmest regards,
Platt Wealth Management