February 2024 Market Insights

BY: RYAN P. JOHNSON, CFA, CFP® - MANAGING DIRECTOR OF INVESTMENTS

The S&P 500 crossed above 5,000 for the first time, and the Technology sector grew to be 30% of the index, despite higher interest rates since the start of the year. Rates reflect adjusted market expectations of Fed cuts starting later in the year.

Stocks:

The S&P 500 is currently up more than 5% this year, still being mostly driven by the largest stocks. Earnings reports for Q4 are nearly complete, and the overall rate of sales and earnings “beats” were in-line with longer-term averages. While much of the return in 2023 came from higher valuations, earnings growth should lead the way in 2024, with over 10% growth currently expected. Earnings growth will be needed for the rally to continue because the forward price-to-earnings, or P/E, ratio of the S&P 500 is above average at over 20 times and the dividend yield is low, around 1.4%.

Bonds & Fed:

Yields have risen month-to-date and year-to-date, but only back to levels last seen around Thanksgiving. Recent consumer inflation and producer inflation reports were a bit higher than expected. Combined with earlier comments from Fed Chair Powell and the strong jobs report in early February, market expectations for the first cut in the Fed Funds rate moved from a 50-50 chance for a March cut to the chance of the first cut coming in mid-June. These estimates move around quite a bit, so we would not count out a May 1st rate cut just yet, depending on how future inflation readings pan out. Recent Treasury yields were 4.3% or higher across the yield curve and A-rated corporate bonds yielded 5% or more.

Economy:

The jobs market remains strong, with over 350,000 jobs added in January and national unemployment remaining low at 3.7%. The ISM Manufacturing index and the ISM Services index both increased over 2 points in the recent readings compared to the prior month; this concurrent jump rarely happens and is a sign of economic strength. The first reading of Q4 GDP was 3.3%, above expectations, and other reports such as new home sales, consumer sentiment, and a CEO survey have shown strength as well. The recent consumer price index report showed some interesting year-over-year inflation components, including food at home +1.2%, vehicle insurance +20.6%, admission to sporting events +13.5%, and used car and truck prices -3.5%. Natural gas prices have recently fallen to nearly 5-year lows, which should help many with their winter heating bills.

Also Interesting:

From 2022-2029, over 4 million Americans will turn 65 each year, with a peak of 4.18mil in 2025.

Buckingham is here for you:

Buckingham Advisors continues to welcome new households and small businesses to our Family of Clients!  Thank you to our clients for your referrals and continued support. Our focus remains on serving each family, each business, and each foundation with special attention to what matters most to them. If you found this edition of Market Insights informative, please send this issue on to others. To get in touch directly, please use the following link: https://mybuckingham.com/contact. 

Thank you for your continued trust and support.

Ryan P. Johnson, CFA, CFP®
Managing Director of Investments

RISKS AND IMPORTANT CONSIDERATIONS

Views and opinions expressed here are for informational and educational purposes only and may change at any time based on market or other conditions or may not come to pass.  This material is not a solicitation to buy or sell securities and should not be considered specific legal, investment, or tax advice. The information provided does not consider the objectives, financial situation, or needs of any specific individual.  All investments carry a degree of risk and there is no certainty that an investment will provide positive performance over any stated period.  Equity investments are subject to company specific and market risks.  Equities may decline in response to adverse company news, industry developments, or economic data.  Fixed income securities are subject to market, credit, and interest rate risks. As interest rates rise, bond prices may fall.  Past performance is no guarantee of future results.