Broker Check

Market Recap

February 15, 2024

Despite a few hiccups along the way, the first half of February maintained, or in some cases accelerated, the growth trajectory for all major markets. 

Dominating the news cycle and fueling market volatility was the trifecta of: inflation, the Federal Reserve (the Fed), and interest rates. (Stop me if you’ve heard this one before!) As we’ve discussed previously, in the war against high inflation, the primary weapon in the Fed’s arsenal is raising interest rates. The collateral damage incurred when deploying that weapon is the economy and stock markets.   

By contrast, lowering interest rates tends to boost the economy and stock markets. That’s why any news story suggesting falling inflation spurs market growth, while any report that indicates inflation may be “sticky” or “higher for longer” tends to promote market selloffs. We saw an example of that earlier this week.

Tuesday the 13th marked the release of the January Consumer Price Index (CPI) report. The year-over-year measure of inflation (January 2023 – January 2024) came in at 3.1%. On a monthly basis, January CPI rose 0.3%. Both readings were a little higher than economist expectations, which sat at 2.9% annually and a 0.2% monthly increase.1 That data led to the strongest 1-day market selloff of 2024, with the Dow Jones Industrial Average (the Dow) and the S&P 500 Index both down 1.4% and the NASDAQ Composite Index (NASDAQ) down 1.8%. (Although it’s important to note that the majority of those losses were regained over the next two days.)

As the Fed continues to walk the precarious path of attacking inflation while not killing the economy markets are adjusting their expectations for an eventual cut to interest rates. At the beginning of 2024, they anticipated 6 cuts in the year2, possibly beginning as soon as March. Recent comments made by Fed Chairman Jerome Powell and other Fed members have indicated there may be fewer cuts, beginning later in the year. Perhaps more important, however, is the fact that the Fed plans on cutting rates sometime this year, which is good for the economy and investors.

In other news, election rhetoric, especially in the Presidential Election, is ramping up. While history shows that the markets do not care who gets elected, they do hate not knowing. For that reason, we expect continued volatility through the fourth quarter, while we are also optimistic for 2024.

Reviewing returns for the first half of February, the markets all posted gains. As of market close on February 15th, the Dow Jones Industrial Average (Dow) rose 623 points (1.6%), the S&P 500 grew 184 points (3.8%) and the NASDAQ Composite Index (NASDAQ) gained 742 points (4.9%). 

1, “Dow tumbles more than 500 points as hot inflation data stokes fears about higher-for-longer rates” February 13, 2024

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