Monthly Market Update - March 2024


  • The S&P 500 Index rose 5.2% in February, hitting a new all-time high, with a year-to-date increase of 7.1%.
  • Despite the market’s strength, consumer confidence unexpectedly declined, possibly due to election stress and ongoing negative news from overseas war zones.
  • Consumer spending is softening, as evidenced by declines reported by shipping and delivery companies, while the housing market and big-ticket consumer spending remain sluggish due to high borrowing costs.­

An extra trading day on February 29 was additive as the S&P 500 Index rose 5.2% for the month, reaching a new all-time high. Year-to-date, the index is up 7.1%. The tech-heavy NASDAQ also hit a new high. So far this year, the “Magnificent Seven,” which powered index returns in 2023, has lost some luster, although market advances continue to be fueled by a small number of technology-centric stocks. Meanwhile, the broader market has shown improved strength. The strong February return saw more than 70% of the S&P 500 stocks positive while small and mid-sized stocks advanced in line with the large-cap indices, even as they face potentially greater earnings pressures from high interest rates and input costs.

Despite the strong market, receding inflation, and unemployment near a 50-year low, February saw an unexpected decline in consumer confidence. Some of this can be attributed to election stress as prospects for a November presidential election featuring two unpopular candidates came into focus. Steady gloomy news from two overseas war zones was an additional cloud.

The strong returns of late 2023 were powered by the prospect of numerous Federal Reserve rate cuts, once seen as beginning as early as March. Consensus has moved to our level of skepticism, but the market has plowed ahead regardless, buoyed, it seems, by the backdrop of a stronger-than-expected economy and the willingness to accept a slower and more cautious Fed. The latest inflation print, coming on leap day, kept the trend in place as the closely observed personal consumption expenditure (PCE) numbers fell right in line with expectations.

One trend to keep an eye on is the softening of consumer spending, as seen in a broad decline reported by shipping and delivery companies. While strong employment numbers continue to support economic growth, much of the world is currently in recession, and we are not immune to a slowdown. Behind the high cost of borrowing, the housing market remains sluggish, as does big-ticket consumer spending, including cars. Slackening demand has led to price declines in many areas of goods, leaving inflation now largely centered on the cost of services.

While the valuations of favored stocks are well below the feverish pitch we saw in the tech boom of the late 1990s, the excitement over the prospects of artificial intelligence and the rosy earnings projections for the year ahead warrant some careful comparisons. Today is quite different in how business momentum and real earnings have boosted the highest flying stocks. At the same time, we always have an eye on risk and see some mounting evidence that expectations may exceed reality.

The remainder of 2024 will likely be dominated by increasing focus on the election. This anxiety may be balanced by expected rate cuts. Lower rates translate quickly into lower borrowing costs, potentially fueling a latent desire for big-ticket consumer items. The U.S. economy remains the strongest in the world.

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