Market Recap – March 8, 2024

Summary:

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

US large cap stocks were positive as Jerome Powell testified that the Fed is looking to begin cutting rates this year. Interest rate sensitive small cap stocks and US bonds rallied as longer-term interest rates fell.  International stocks rose as India’s real GDP grew by 8.4% YoY compared to the 6.5-7% expected. [2]

  • Unemployment Rate: The unemployment rate unexpectedly increased from 3.7% to 3.9%, which puts it at the highest level since January of 2022. The labor force participation rate remained unchanged at 62.5%.  Overall, the labor market continues to slowly weaken. [3]
  • Costco Earnings Takeaways: Costco’s quarterly earnings slightly missed revenue expectations but beat earnings.  However, two key takeaways are that membership price increases are coming and the crackdown on membership sharing is working.  [4]
  • Gold Prices Continue to Shine: Gold prices rose for their 8th straight trading day in a perfect combination of hopes for rate cuts, central bank buying, and geopolitical uncertainty. Gold is considered a safe haven against uncertainty and a hedge against reckless government finances.  [5]

Chart of the Week:

Economic Outlook:

  • Unemployment: We expect the unemployment rate to continue to slowly trend upwards throughout 2024 as heavily indebted firms struggle to refinance their debt at higher interest rates.
  • 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 March 1st, 2024-March 7th, 2024

*YTD is Jan 2nd, 2024-March 7th, 2024

By: Nick Colletta, CFA, CAIA

Sources:

  1. https://www.morningstar.com/
  2. Nifty 50, Sensex gain over 1% each: Why Indian stock market is rising today — explained with 5 reasons | Mint (livemint.com)
  3. NYCB Shares Drop After Bank Reports $2.4 Billion Earnings Hit, Names New CEO – Bloomberg
  4. 4 Key Takeaways From Costco’s Earnings Call (msn.com)
  5. Gold Rises After February 2024 US Jobs Report – Bloomberg

 

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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