Economic Update 3-19-2024

• Economic data for the week included a rise in retail sales, and a small increase in industrial production, while consumer sentiment fell back. U.S. consumer and producer inflation both came in a bit sticky on a monthly basis, but still well down from levels in prior months.
• Equities were mixed, with little change on net in U.S. and foreign markets, despite some divergences on a regional basis. Bonds fell back with rising yields, related to higher recent inflation readings. Commodities gained, driven by energy and industrial metals.

U.S. stocks were mixed last week, with little change in large caps and declines for small caps. Tuesday’s CPI release didn’t provide the hoped-for sharper deceleration, but didn’t deteriorate further, which may have provided some relief, although interest rates continued to rise on an expected longer runway for the current Fed policy pause. Friday was a triple-witching day, which happens four times a year, featuring a compilation of option expirations and typically enhancing volatility. By sector, energy rose nearly 4% followed by materials, while consumer discretionary fell back about a percent. Real estate also declined by nearly -3%, being sensitive to rising yields during the week.

Foreign stocks were mixed, with minor gains in Europe and the U.K. while Japan fell back sharply. European sentiment has been led by stronger earnings results and more solidified conviction about a June ECB rate cut, as well as U.K. GDP rising just over zero. By contrast, despite strong sentiment toward Japan this year, based on progress in corporate governance and pro-shareholder reforms, the chances of rising interest rates (away from negative short-term rates) have weighed on the mood. Emerging markets were flattish on net, with strong gains in China of several percent offset by declines in India and elsewhere. Chinese inflation has improved, moving from outright deflation into positive territory, coupled with improved sentiment about increased government stimulus measures to improve financial markets on the edges.

Bonds fell back as yields rose across the board. This was driven by stickier-than-expected inflation data, which seems to further solidify a later-than-expected starting point for Fed rate cuts. Senior floating rate bank loans were the only positive-returning bond segment for the week. Foreign bonds underperformed, as a result of the stronger dollar.

Commodities gained across all categories last week, led by energy and industrial metals. Crude oil rose over 3% last week to $81/barrel, partially resulting from Ukrainian drone strikes on Russian refineries, as well as stronger sentiment surrounding global demand and lower U.S. supplies.

Period ending 3/15/2024	1 Week %	YTD %
DJIA	0.01	3.22
S&P 500	-0.09	7.63
NASDAQ	-0.68	6.58
Russell 2000	-2.02	0.89
MSCI-EAFE	-1.32	4.38
MSCI-EM	-0.12	1.38
Bloomberg U.S. Aggregate	-1.23	-1.72

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
3/8/2024	5.46	4.48	4.06	4.09	4.26
3/15/2024	5.48	4.72	4.33	4.31	4.43

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.