We’re still seeing strong upside momentum in price action and this should continue thru the end of March into April. I am seeing some signs of a possible pullback in the April / May timeframe but I suspect Buyers will quickly be willing to step in. A smaller pullback will be welcome and that is the higher probability move near term. Get my take on this week’s market round-up.
WEEKLY SOUND BITES:
US Indexes ended higher for the week, pushing the S&P 500 Index and the Nasdaq Composite to new records, as investors welcomed news that Federal Reserve policymakers were still anticipating three interest rate cuts later in the year. We should give thanks to Central Banks, from the US FEDs, BOE, ECB and BOJ…all talking about rate cuts coming, even in a heightened inflation market. We are also seeing major Latin American Central Banks, Led by Brazil and Mexico are well along in their rate cuts. The use of generative AI could add $2.6 Trillion to $4.4 Trillion to the global economy annually which is helping boost market prices.
The week’s main driver of sentiment appeared to be the Fed’s policy meeting concluding on Wednesday. Investors seemed to take heart from the quarterly release of the Fed’s Summary of Economic Projections, which summarizes the outlook of individual committee members. The so-called dot plot showed that the median expectation for three rate cuts in 2024 remain unchanged, while the median expectations for interest rates in 2025 and 2026 went up by less than 25 basis points (0.25 percentage points), or by less than one cut. Investors also appeared encouraged by Fed Chair Jerome Powell’s post-meeting press conference, where he indicated that he was not overly concerned about the uptick in inflation data in January and February, chalking it up to seasonal noise.
The news from the Feds helped drive a decline in longer-term Treasury yields over the week.
Over in Great Britian, the BOE kept its key interest rate unchanged at 5.25% for a fifth consecutive time, although the 8–1 vote in favor appeared to send a more dovish signal. Two previously hawkish policymakers dropped their calls for a hike in borrowing costs; another backed an immediate cut. This data came a day after data showed that annual consumer price growth decelerated to 3.4% in February from 4.0% in January while services inflation eased to 6.1%. Meanwhile, in the Eurozone, PMI surveys showed that the output of goods and services in the eurozone came close to stabilizing in March, with a first estimate recording only a marginal decline, S&P Global said. The eurozone composite PMI rose to a nine-month high of 49.9 from 49.2 in February.
And in Japan they finally did it – The Bank of Japan (BoJ) made a much-anticipated policy shift and finally exited its negative interest rate policy. The central bank announced that it will set a policy rate target of 0 to 0.1%, up from -0.1%. The BoJ also ended its yield curve control program. However, Governor Kazuo Ueda affirmed that financial conditions would remain accommodative as inflation expectations were still below the 2% target which also helped their equity markets move higher on the week. On the Japanese economic data front, consumer price inflation, as measured by the consumer price index (CPI), rose to a higher-than-anticipated 2.8% annualized over the month of February. This was a sharp pickup from January’s 2.0% and well ahead of the BoJ’s inflation target.
And over in China, the Chinese equities retreated as concerns about the property sector slump offset optimism about better-than-expected economic data. Property investment in China fell by 9% in the January–February period from a year earlier, slowing from a 24% drop in December while property sales sank 20.5% in the first two months of the year, after slumping 23% in December. Other data showed that some parts of China’s economy were picking up. Industrial production rose an above-forecast 7% in January and February from a year earlier, up from December’s 6.8%. Fixed-asset investment grew 4.2% in the first two months of the year from the prior-year period, rising from 3% in December amid higher infrastructure growth. Retail sales rose more than expected over the two-month period as consumption surged during the weeklong Lunar New Year holiday but eased from December’s increase. The urban unemployment rate was 5.3%, while the youth jobless rate edged up to 15.3%.
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