Hope you are all doing well. The S&P 500 rose around 1% and the NASDAQ added nearly 2%, with the latter index on Thursday surpassing its previous record high set in November 2021. So far in 2024, the indexes have generated positive results in seven out of nine weeks. The S&P 500 pushed its record level higher eight times in February and climbed 5.2% overall, extending its positive streak to four months in a row. Over that stretch, the index’s cumulative gain was 21.5%. All 11 sectors were positive last month, led by communication services. Richard Lewis passed away this week, I have broken down this week’s update using some of his memorable one liners.
“Most of my family were nuts. My mother gave my sister’s dolls polio shots.” – Richard Lewis
Speaking of insane, the price of Bitcoin, the most widely traded cryptocurrency, eclipsed $60,000 for the first time since November 2021. It remained below the record of nearly $69,000 that it set that month. However, Bitcoin’s price jumped about 44% during February and rose 20% over this week alone as it traded above $62,000 on Friday.
“I’m the Descartes of anxiety; I panic, therefore I am.” – Richard Lewis
Inflation continues to be the main source of anxiety for the markets. This week we got some good news on that front. The US Federal Reserve’s preferred gauge for tracking inflation showed that consumer prices continued to rise at a slower pace. The Personal Consumption Expenditures Price Index posted a 2.8% annual rate in January, excluding volatile food and energy prices. That result matched most economists’ expectations and marked the slowest increase since March 2021. Inflation slipped in the 20 countries that use the euro as their currency. The eurozone’s annual inflation rate fell to 2.6% in February from 2.8% the previous month. Excluding the volatile food and energy categories, core inflation fell in the Eurozone to 3.1% down from 3.3%.
“I’d rather be wrong than think I’m right and bug people.” – Richard Lewis
I have been happily wrong about stocks potential correcting in the short term as the indexes continue to make new highs. I felt we would get a pull back as the market re-prices expectations for the Fed. I was correct about continued economic growth and the stubbornness of inflation. However the market has not reacted the way I thought it would to the realization that the Fed is not in a rush to ease policy. The six rate cuts that were priced in by the markets at the start of the year have been reduced to three, which is higher still than my expectation of one or two but in line with the Fed’s projections.
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