Market Recap – March 1, 2024

Summary:

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

US large cap stocks were relatively flat as inflation measures were in line with expectations.  Interest rate sensitive small cap stocks and US bonds rallied as longer-term interest rates fell.  International stocks fell as Indian stocks fell as Sebi, the SEC of India, put more stringent requirements on domestic mutual funds. [2]

  • NYCB’s Material Weakness: New York Community Bancorp slid another 23% and replaced their CEO due to discovering “material weaknesses” in how it tracks loan risks and writing down the value of companies they acquired years ago.  Their stock is down over 65% year-to-date. [3]
  • Musk Sues OpenAI: Elon Musk sued OpenAI, alleging CEO Sam Altman violated their foundational agreement prioritizing humanity over profits.  Musk, an original board member of OpenAI, departed in 2018. [4]
  • Boeing’s Next Crisis: Boeing is facing another potential crisis amidst the quality control issues with their planes.  Boeing’s largest union, the International Association of Machinists and Aerospace Workers, will demand a 40% pay raise over three or four years.  It is estimated that every 10% increase in machinist wages reduces Boeing’s free cash flow by $260 million.  [5]

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 consistent risk to shipping, which has been shown by research to have spillover effects into inflation.  Freight rate costs have almost tripled in price since November 30th. [5]
  • Inflation: We expect a second, less severe, round of inflation to begin in 2024. We see inflation staying consistently above the Fed’s target of 2% in the coming years, structurally bound between 2-5%.
  • Short-Term Interest Rates: We put the odds of any rate cut before June of 2024 at less than 25%. Goods inflation should reaccelerate as services inflation moderates, leading to potential rate cuts in the second half of 2024.
  • Long-Term Interest Rates: We expect longer-term interest rates to stay elevated and relatively volatile, which is consistent with sticky inflation. Longer-term interest rates have a high correlation to GDP growth and inflation expectations.

*US Small Cap Stocks is Russell 2000

* US Bond Market is Bloomberg Aggregate

*International Stocks is MSCI ACWI ex-US Index

*Weekly Returns is Feb 22nd, 2024-March 1st, 2024

*YTD is Jan 2nd, 2024-March 1st, 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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