Market Recap – February 9, 2024

Summary:

  • Weekly Returns (Friday Open – Thursday Close) & YTD Returns*: [1]

US stocks had a positive week as Q4 earnings were generally better than expectations despite worries of an economic slowdown. US bonds were down as rates increased due to the stronger earnings growth and Federal Reserve officials reiterating the desire to push back rate cuts.

    • China’s Deflation: Deflationary pressures are continuing to become more entrenched in China’s economy. On an annualized month-over-month basis, consumer prices fell 4.3%. Deflation is partially attributable to weak consumer demand and confidence due to the ongoing property market crisis in the country.
    • Eli Lilly Earnings: Eli Lilly became the first healthcare company to cross the $700 billion level in market cap, fueled by their impressive revenue and earnings numbers attributable in large part to their weight loss and diabetes drugs Zepbound and Mounjaro. [3]
    • Venezuela-Guyana: Venezuela has deployed light tanks, missile-equipped patrol boats and armored carriers to the border of Venezuela and Guyana. This is coming off Guyana emerging as one of the world’s hottest energy frontiers after Exxon-Mobil found large offshore oil deposits. [4]

Chart of the Week:

Economic Outlook:

  • Geopolitics: We expect the tensions in the Middle East to continue to boil over. These military conflicts pose a consist risk to shipping which have been shown by research to have spillover effects into inflation. Freight rate costs have almost quadrupled in price since November 30th. [5]
  • Inflation: Inflation showed some signs of picking up in December of 2023. We expect inflation to continue to cool a bit during Quarter 1 and then start to pick back up again due to geopolitical conflicts and government spending after that.
  • Short-Term Interest Rates: We expect the Federal Reserve to lower interest rates once or twice in 2024, beginning around May or June. However, this trend is likely to pause due to rising inflationary pressures.
  • Long-Term Interest Rates: We expect longer-term interest rates to continue to stay elevated, which is consistent with our view that inflation will rebound in the second half of 2024. Longer-term interest rates have a high correlation to the combination of the growth in GDP and long-term inflation expectations.

*US Bond Market is Bloomberg Aggregate

*International Stocks is MSCI ACWI ex-US Index

*Weekly Returns is Feb 2nd, 2024-Feb 8st, 2024

*YTD is Jan 2nd, 2024-Feb 8th, 2024

By: Nick Colletta, CFA, CAIA

Sources:

Bridge Advisory LLC Disclosures

Bridge Advisory, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. Investment Advisory Services offered through Bridge Advisory, LLC. Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type. Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Information herein has been obtained from sources believed to be reliable, but Bridge Advisory, LLC. does not warrant its completeness or accuracy; opinions and estimates constitute our judgment as of this date and are subject to change without notice. This newsletter expresses the views of the authors as of the date indicated and such views are subject to change without notice.

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