February 2024 Newsletter

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Read February 2024 Market Insights

The “January” Indicator

An old saying in the market used to be “as goes January, so goes the year,” suggesting that if January had negative returns, the full year might follow suit. However, recent history shows that this isn’t usually true. Since 1990, there have been 15 years with negative S&P 500 returns in January, and only six of them had negative full-year returns (40% of cases). So, a negative or bumpy January doesn’t necessarily mean the entire year will be down.

S&P500 & DOW Set Records!

Major U.S. stock indexes added to this month’s gains, and a rally on Friday 1/19, pushed the S&P 500 to a level that broke its previous all-time closing high set on January 3, 2022. The Dow topped a record that it had set 17 days earlier. The latest gains marked the 11th positive week out of the past 12.

Inflation Moderation

Two monthly price reports extended the recent trend of uneven progress to curb inflationary pressures. The Consumer Price Index posted a month-to-month rise of 0.3% in December—slightly above most economists’ expectations and the third monthly increase in a row. However, the Producer Price Index—which tracks prices that factories charge wholesalers—slipped 0.1%. 

Yield Rebound

A sharp decline in weekly unemployment claims was among the factors that shifted the outlook for interest-rate cuts and drove the yield of the 10-year U.S. Treasury bond to its highest level in more than five weeks. On Friday, the yield closed around 4.14%—up from a recent low of 3.79% on December 27.

Bitcoin ETFs & Bitcoin Surge

The price of Bitcoin, the most widely traded cryptocurrency, faded on Friday after jumping to the highest intraday level since March 2022. Bitcoin briefly eclipsed $48,000 on Thursday, up from a recent low of around $25,000 in September 2023. On Friday, the cryptocurrency was trading below $44,000.

Stocks Pull Back After Mixed Bank Earnings, But Outlook Remains Positive

Bank earnings season is underway, and while most results topped expectations, concerns about future net interest income weighed on the sector. This pullback highlights the market’s cautious mood even as economic resilience supports broader corporate profits. Last year, corporate profit estimates dipped but remained surprisingly strong despite challenges. Looking ahead, expectations are for a reacceleration in earnings, likely buoying equities. Valuations may not skyrocket, particularly for mega-cap tech, but the S&P 500’s forward estimates exceeding 2022 peaks suggest the uptrend in stocks is still alive.

Forget exhaustion, stock market recoveries with new highs often signal future strength, not weakness. Just look at this week: the Dow soared to a record and the S&P 500 hit new heights. History’s on our side too – after reclaiming previous peaks, markets typically climb for another 3 years before encountering the next bear. Yes, it took 2-3 years to reach this point, but with rising corporate profits fueling the flames, the current trajectory hints at even more green in the years to come. So, instead of fearing a pullback, celebrate the new high watermarks – they might just be the springboard for the next wave of market gains.