The Institute of Supply Management (ISM) conducts a monthly survey that focuses on the manufacturing industry. The survey shows the New Orders index climbed above the key 50 threshold in January 2024, the first time in 16 months. The rise above 50 indicates that manufacturing activity may be starting to expand again, but it also provides insight into corporate earnings.

This week, the BLS reported that the Consumer Price Index (CPI) gained 0.4% on a monthly basis, which was stronger than what investors had anticipated and on par with the prior read. Investors are concerned that with inflation proving resilient, the Fed might decide to implement fewer rate cuts than hoped for and later this year than expected. The consensus on Wall Street is that the Fed may only reduce interest rates in one or two increments in the year's second half.

In 2024, the S&P 500 index had a return of over 10% for the second quarter in a row, resulting in the setting of multiple new all-time highs. In this recap, we will review the first quarter, discuss the strong start of the stock market in 2024 and provide an overview of what to expect for the rest of the year.

Despite stronger-than-expected inflation data for January and February, Fed Chairman Jerome Powell anticipates cuts to short-term interest rates in the second half of this year. Indications are that the domestic economy remains healthy, but growth is easing. Though employment has proven resilient, new hires and wage increases are slowing.

You have likely seen headlines and news reports discussing artificial intelligence as a major technological advancement. Two notable themes emerge: (1) companies have been discussing AI for over a decade, and (2) the recent number of mentions around AI is slowing.

Stocks traded higher in February, with the rally broadening after large cap stocks accounted for most of January’s gains. The S&P 500 traded above 5,000 for the first time, setting a new all-time high, and has now returned +21.5% since the start of November.

This week saw the release of the minutes from the latest Federal Open Market Committee (FOMC) meeting held on January 30–31, 2024. Federal Reserve officials were concerned about upside inflation risks, driven by still strong demand. Overall, the FOMC minutes were more hawkish than dovish concerning potential near-term monetary policy decisions.

The initial data releases for January paint a picture of a sluggish start to 2024. While job growth showed resilience, there were concerns about consumer spending and industrial output. Our take is that the growth rate is slowing as the lagged effects of tightening work through the system. However, without a sharp deceleration in the data, the U.S. appears unlikely to enter a recession in 1H 2024.

The US unemployment rate is currently 3.7%, which is low compared to historical standards. This is notable considering that during the past two years, the U.S. economy experienced one of the sharpest rises in interest rates on record. Why does the unemployment rate remain low today?

This week, we recap several macro events, including the Standard & Poor’s 500 (S&P 500) closing above the 5,000 mark, a new milestone for the US market. In addition, the US Bureau of Labor Statistics (BLS) released a strong January jobs report, which showed that 353,000 jobs were created in January, far exceeding the analyst’s forecast of 185,000.

Stocks traded higher to start the new year, with the S&P 500, NASDAQ 100, and Dow Jones Industrial Average each setting new all-time highs. In continuation of last year’s trend, the companies with the biggest market caps accounted for a substantial portion of the early-year gains.

In Q4 2023, U.S. GDP expanded at a +3.3% annual pace, a slowdown from Q3’s +4.9% but the second-strongest growth since Q4 2021. The U.S. Bureau of Economic Analysis (BEA) reported this week that the Personal Consumption Expenditures (PCE) price index was up 0.2% for December vs. the 0.1% decline posted in November.

Since March 2022, the Fed has raised rates by a total of 5.25%. With the tightening cycle nearly 20 months old, concerns are growing about a 2024 economic slowdown. We examine several potential catalysts.

In December 2023’s edition of the University of Michigan Survey of Consumers, there was notable development as the percentage of consumers expecting lower interest rates over the next 12 months rose to nearly 30% from 12% the prior month.

Investors on Wall Street have been anticipating a further pronounced easing of inflation. This week, the release of the December Producer Price Index (PPI) and Consumer Price Index (CPI) reports showed inflation running slightly hotter than expected. However, the long-term trend continues to be favorable.

Financial markets underwent a sizeable shift in the fourth quarter. Treasury yields spiked in Q3, reversed lower as inflation eased, and the Federal Reserve hinted at interest rate cuts in 2024. The decline in interest rates was a significant tailwind for stocks and bonds. Here, we will recap the fourth quarter and look ahead to 2024.

As we enter 2024, our indicators signal an improving financial environment. The year-end rally may extend into early January, but potential headwinds loom in 2024 Q1. We believe these headwinds stem from the market's optimistic rate-cut forecast and exuberance rather than an economic slowdown.

The stock market extended its recent rally this week, and investor sentiment continues to be positive, backed by the Federal Reserve Chairman Jerome Powell and the Federal Open Market Committee’s (FOMC) decision to hold the federal funds rate steady at 5.25%-5.50%.

The Federal Reserve has raised interest rates by more than 5% since March 2022. It has been the fastest pace of tightening in decades, but data shows the economy has been resilient thus far. The U.S. economy grew at a 5.2% annualized pace in the third quarter of 2023.

The S&P 500 recorded its biggest monthly gain since July 2022 and currently trades less than 5% below its all-time closing high. The NASDAQ 100 Index gained +10.8% as mega-cap growth stocks such as Microsoft, Apple, and NVIDIA traded toward new all-time highs.