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%). 

1,2www.cnn.com “Dow tumbles more than 500 points as hot inflation data stokes fears about higher-for-longer rates” February 13, 2024

The views and opinions expressed herein are those of the author(s) noted and may or may not represent the views of Capital Analysts or Lincoln Investment. The material presented is provided for informational purposes only. Past performance is no guarantee of future results. No person or system can predict the market. There is no guarantee that any strategies discussed will result in a positive outcome. All investing involves risk and no investment strategy can guarantee a profit or protect against loss, including the potential loss of principal. Inflation is the rise in the prices of goods and services, as happens when spending increases relative to the supply of goods on the market. S&P 500 Index is an index of 500 of the largest exchange-traded stocks in the US from a broad range of industries whose collective performance mirrors the overall stock market. The NASDAQ is an index that tracks the cumulative results on a market capitalization basis of all stocks trading in the NASDAQ system. The Dow Jones Industrial Average is a widely watched index of 30 American stocks thought to represent the pulse of the American economy and markets. Investors cannot invest directly in an index. Diversification does not guarantee a profit or protect against a loss. Information on taxes is provided for educational purposes only and is not intended to be tax advice. You should speak to a tax professional concerning your specific situation. When you click on the link provided in this email, you are visiting an independent, third-party website. The Lincoln Investment Companies makes no representation as to the completeness or accuracy of information provided at the site. Nor are we liable for any direct or indirect technical or system issues or consequences arising out of your access to or use of any third-party site. When you access this site, you assume total responsibility for your use of the site you are visiting.