Broker Check

Market Recap

March 01, 2024

Markets traded in a fairly narrow range during the second half of February, with all the major indexes posting gains at the end of the month.

Investors continue to fixate on inflation readings, which in turn dictate the likely course of action by the Federal Reserve (the Fed). Focus is on when the Fed may begin cutting interest rates, which would in turn boost market returns. 

The last 5 months have seen a dramatic swing in expectations for that eventual rate cut. As recently as last October, investors expected minimal changes to interest rates in all of 2024. Two months later, following the Fed’s December meeting (and subsequent comments) sentiment shifted greatly, with expectations for up to 7 rate cuts this year, beginning as early as March.1 

However, as the economy continues to be strong and unemployment numbers remain low, that optimism has moderated. Minutes from the Fed’s January meeting, released earlier this week, noted “the risk that progress toward stability could stall” if we see a strong growth in consumer spending and hiring by businesses.2 As a result of this strength, today 3 rate cuts are expected (and possibly a 4th) with June being the likely beginning.3

On Thursday the most recent reading of the Personal Consumption Expenditures (PCE) index was released. That reading, for the month of January, showed that inflation grew by 2.4% year-over-year, which was in line with economist expectations and was a decline from last month’s reading of 2.6%. This modest decrease in inflation is good news, particularly because the PCE is the most often referenced measure of inflation by Fed Chairman, Jerome Powell.4

While the market will likely continue its guessing game, we prefer to focus on the facts: inflation is moving in the right direction and interest rate cuts are coming. We believe that patient investors will be rewarded.

Reviewing returns for the second half of February, the markets all posted gains. As of market close on February 29th, the Dow rose 223 points (0.58%), the S&P 500 grew 67 points (1.32%) and the NASDAQ gained 186 points (1.17%). 

 

www.jpmorgan.com “Weekly Market Recap; Week of February 26, 2024” February 26, 2024

www.jhinvestments.com “Weekly Market Recap; Week ended February 23” February 26, 2024

www.jpmorgan.com “Weekly Market Recap; Week of February 26, 2024” February 26, 2024

www.finance.yahoo.com “Stock market today: Stocks waver after Fed’s preferred inflation gauge meets expectations” February 29, 2024

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