Economic Update 4-29-2024

• Economic data for the week included U.S. economic growth coming in positively for Q1, but not as robust as expected, in addition to rises in durable goods and new home sales, while consumer sentiment remained challenged.
• Equities were positive globally last week, with stronger corporate earnings and positive economic data abroad. Bonds were mixed as yields were stable to a bit higher across the yield curve. Commodities were also mixed, with energy higher and metals lower.

U.S. stocks rebounded last week, as the busiest week of the quarterly earnings season took more of the market’s attention. Per FactSet, nearly half of S&P 500 firms have now reported results, with over 75% with a positive earnings surprise, and 60% with a positive revenue surprise. The blended year-over-year earnings growth rate for the quarter also improved to 3.5%.

By sector, consumer discretionary and technology stocks led with gains upward of 4-5%, followed by industrials and consumer staples. Laggards with only minor gains included health care, materials, and energy. Real estate saw gains of over a percent, despite higher yields. Again, most eyes were on the high-profile ‘Magnificent 7’ group. In discretionary, Tesla shares were up on investors cheering news on announcement of expected production of cheaper electric cars in the coming year, as well as futuristic talk of robots. In communications, Meta fell over -15% as investors appeared disappointed by weaker guidance for future revenue, as well as heavy spending on AI with an uncertain near-term payoff. However, that increased spending benefited sentiment around Nvidia. Alphabet, on the other hand, saw earnings beat expectations in addition to announcing its first dividend. These tech reports continue to show a bifurcation of optimism about AI’s potential in coming years, but also large expenses required to keep up in the increasingly competitive landscape.

Foreign stocks saw positive results as well, with the U.K. and emerging markets outpacing Europe and Japan. Sentiment was driven by stronger economic and PMI results, signs of improvement in corporate earnings, as well as the apparent easing of Middle East tensions. Among the emerging nations, all key markets saw gains, led by a 7% rise in China, as sentiment about this year’s economic growth picture appeared to improve, as well as announced reforms to capital markets intended to strengthen governance and provide better shareholder protections.

Bonds were mixed last week, with short-term yields little changed, while long-term yields rose a bit. Corporates, especially high yield and senior floating rate loans, outperformed governments. Foreign bonds were mixed along with little change in the U.S. dollar. Interestingly, the 10-year U.S. Treasury yield of 4.7% is not far from the just-released Q1 nominal GDP (real+inflation) rate of 4.8% last week. Traditionally, these two numbers have run fairly close to each other in normal times, aside from more extreme zero-rate policy periods and recessions.

Commodities were mixed last week, with gains in energy and agriculture offset by declines in industrial and precious metals. Crude oil rose 2% last week to $84/barrel, as inventories fell back a bit. Some of the embedded geopolitical premium (assumed to be somewhere in the neighborhood of $5-10) has appeared to have drained away, in no small part to higher U.S. production capacity, in addition to capacity elsewhere, which has provided a safety valve of sorts.

Period ending 4/26/2024	1 Week %	YTD %
DJIA	0.67	2.05
S&P 500	2.68	7.38
NASDAQ	4.23	6.32
Russell 2000	2.80	-0.84
MSCI-EAFE	1.92	2.77
MSCI-EM	3.77	2.36
Bloomberg U.S. Aggregate	-0.08	-3.19

U.S. Treasury Yields	3 Mo.	2 Yr.	5 Yr.	10 Yr.	30 Yr.
12/31/2023	5.40	4.23	3.84	3.88	4.03
4/19/2024	5.45	4.97	4.66	4.62	4.72
4/26/2024	5.46	4.96	4.68	4.67	4.78

Sources:  LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Kiplinger’s, Marketfield Asset Management, Minyanville, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Rafferty Capital Markets, LLC, Schroder’s, Standard & Poor’s, The Conference Board, Thomson Reuters, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research.  Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends.  Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.                                                                                    

The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness.  All information and opinions expressed are subject to change without notice.  Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.