April 2024 Newsletter

Read the full newsletter HERE

Read April 2024 Market Insights

Quick Summary of the FOMC Meeting on March 20th

• The Federal Reserve concluded its March FOMC meeting and press conference, releasing updated economic projections. While keeping the fed funds rate unchanged at 5.25% – 5.5%, the Fed’s “dot plot” indicated three potential rate cuts in 2024, suggesting the onset of a multiyear rate-cutting cycle. Despite recent inflation concerns, Fed Chair Jerome Powell expressed confidence in inflation gradually declining towards 2%.
• Market reactions were positive to the Fed’s dovish stance, with stock markets hitting new highs and bond markets rising as Treasury yields softened. Sectors like industrials and financials, along with small-cap and mid-cap stocks, performed well, hinting at a broader market leadership shift driven by improved economic prospects and the possibility of lower interest rates in the future.

Interest Rates Still Expected to Start This Year

The Fed’s recent projections suggest they’re leaning towards lowering interest rates over the next three years. They still expect three rate cuts in 2024, but there’s some disagreement among the voting members about how many cuts should happen this year. Overall, the Fed is hinting at starting a multiyear period of cutting rates sometime soon. They plan to gradually reduce the fed funds rate from 5.25% – 5.5% to 3.1% by 2026. This shift indicates a move towards a more balanced policy, depending on outside factors and a reduced need for strict measures.

New Outlook for Economic Growth

The Fed upgraded its outlook for how much the economy will grow from 2024 to 2026. Before, they thought it might slow down, but now they expect it to grow faster. In 2024, they predict the economy will grow by 2.1%, and then by 2.0% in 2025 and 2026. Fed Chair Powell said the economy is doing well, with lots of jobs and lower inflation. They also think the unemployment rate will go up a bit to 4.0% in 2024.

Expanding Market Leadership: Rate Cuts and Improved Economic Growth Could Extend This Trend

Investors embraced the Federal Reserve’s more cautious stance last week, leading to a positive response in the markets. The S&P 500 climbed over 2%, with all major indices showing upward trends. Particularly noteworthy was the outperformance of small and mid-cap indexes following Wednesday’s Fed meeting. Moreover, the market rally was not limited to the technology sector but also included cyclical sectors such as financials, energy, and industrials. Additionally, investment-grade bonds saw gains as Treasury yields declined post the Fed meeting’s reaffirmation of potential rate cuts.

Inflation Moderation

Friday’s update on the U.S. Federal Reserve’s favored measure of inflation indicated a significant slowdown in consumer price increases compared to previous months. The Personal Consumption Expenditures Price Index recorded a 2.8% annual rise in February, excluding volatile food and energy costs. This rate remained unchanged from the previous month, marking the slowest uptick since March 2021.

Economic Personal Income & Outlays Update

In February, people earned $66.5 billion more money, which is a 0.3% increase. After subtracting taxes, they had $50.3 billion more to spend or save, up by 0.2%. People spent $145.5 billion more, a 0.8% increase. They saved $745.7 billion, with a saving rate of 3.6%. Overall, their spending, interest payments, and transfer payments increased by $149.9 billion.