Economic Update 3-25-2024

• Economic data for the week included the Federal Reserve keeping interest rates unchanged, coupled with a continued balanced narrative. The index of leading economic indicators ticked up for the first time in years, coupled with stronger housing data, including improved existing home sales, starts, and homebuilder sentiment.
• Equities saw gains again around the world, led by strength in the U.S. and Japan. Bonds gained in the U.S. with a broad drop in yields, while foreign bonds were mixed, along with a stronger dollar. Commodities were little changed for the week with minimal price movement in crude oil.

U.S. stocks continued a run of positivity, with the mid-week FOMC decision of leaving rates unchanged being far from a surprise, but the dovish press conference commentary boosted market sentiment, relative to the more hawkish tone that had been expected. Nearly all sectors saw gains last week, led by communications and consumer discretionary, up several percent each, while defensives health care rose a fraction of a percent. Real estate fell a fraction of a percent as well, despite improvements in interest rates. Sentiment in tech remained high, specifically with AI and trend leader Nvidia, as well as rumors of a possible Google-Apple AI-related partnership. Apple, however, was also held back by the U.S. government’s new lawsuit on anticompetitive grounds, with the claim that the iPhone prevented other firms from offering competitive services (via apps). This is not overly surprising, in a string of suits, including Google last year and separate investigations by the FTC against Amazon and Meta. Over the weekend, the President signed a $1.2 tril. government funding package, which avoids the possibility and uncertainty of a partial government shutdown.

Foreign stocks saw positive returns, along with dovish central bank rhetoric, but lagged domestic stocks generally. This was largely due to underperformance in Europe and the U.K., while Japan outperformed. Emerging markets were also little changed, as strength in Korea and Taiwan was offset by weakness in China. Interest rate policy has turned into the key pieces of news in global markets as well. The Bank of England kept interest rates steady, as expected, while providing a dovish narrative. However, the Swiss National Bank became the first central bank in the developed group to cut rates, by -0.25% to 1.50%—a bit of a surprise, even though their inflation rates have been below those elsewhere, and other considerations are often at play (such as their focus on the currency value of the franc relative to the euro). The Bank of Japan raised rates as noted earlier, as did Taiwan, which was also a surprise. Granted, smaller nations don’t have the complexities in policy that the Fed or ECB do. Chinese stocks were held back by more concerns over property markets, with investments and sales falling sharply so far this year. On the brighter side, industrial production and investment in other sectors has shown improvement. The central banks of Brazil and Mexico each cut rates, with improvement in the expected inflation path, while the Turkish central bank raised short-term rates by 5% to a level of 50%, hoping to put a dent in the inflation problem (67% year-over-year) ahead of local elections, and show a return to more conventional monetary policy.

Bonds gained last week, corresponding to a drop in yields across the curve, led by the Fed’s more dovish commentary, with similar results for governments and corporates. Foreign bonds gained in local terms, but declined by a fraction of a percent along with a stronger dollar.

Commodities were mixed, with gains in agriculture, declines in metals, and little change in energy on net. Crude oil prices barely ticked higher last week, ending at still under $81/barrel.

Period ending 3/22/2024	1 Week %	YTD %
DJIA	1.97	5.25
S&P 500	2.31	10.12
NASDAQ	2.86	9.63
Russell 2000	1.61	2.52
MSCI-EAFE	1.21	5.64
MSCI-EM	0.51	1.90
Bloomberg U.S. Aggregate	0.73	-1.00

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
3/15/2024	5.48	4.72	4.33	4.31	4.43
3/22/2024	5.46	4.59	4.20	4.22	4.39

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.