March 2024 Market Insights

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

Positive stock momentum continued as earnings increased, inflation moderated, jobs remained strong, and interest rates remained range bound. The Fed is still talking about a rate cut, but expectations for when that first might take place has been pushed further into the year.

Stocks:

The S&P 500 continued to mark new highs since our last Insights, with the index now up around 8% to start the year. Artificial Intelligence (AI) related stocks have seen continued strength in 2024; the Technology and Communications sectors have been the best performing sectors so far in 2024.

Pullback Preparation:

In a strong market, we are regularly looking to take profits from stocks in portfolio reviews. This is one of the ways we prepare for market pullbacks or corrections. It was recently said that corrections are a feature of bull markets, not a bug. We feel it is noteworthy, yet normal, that stock market drawdowns of 5% or more have occurred in 38 of the past 40 years. On a potentially related note, Presidential election year market volatility typically rises from August to mid-October. Your portfolio’s bond, alternative investment, and cash allocation is designed to provide more stability in a market downturn; several years of your cash needs will be allocated to this portion of your portfolio.

Economy, Bonds, and the Federal Reserve:

The jobs market remains healthy. Though the unemployment rate recently increased to 3.9%, this remains historically low. 4.0% unemployment, excluding the time of COVID, was last seen in January of 2019. The Fed’s preferred inflation measure, Personal Consumption Expenditures (PCE), was recently as expected: year-over-year PCE was 2.4%, while core PCE was 2.8%. The more recent readings on consumer (CPI) and producer (PPI) inflation were not as low as hoped, pushing the odds of a Fed rate cut solidly into June. Yields started off the year near recent lows, reflecting then-fresh hopes of a Fed rate cut. As expectations for the first cut continued to get pushed further into the year, yields rose. We currently view A-rated corporate bond yields over 5% and Treasury yields, when over 4.5%, as attractive for bond investors.

Also Interesting:

Amazon recently replaced Walgreens in the Dow Jones Industrial Average, which coincided with a 3-to-1 stock split by Wal-Mart. Rising fuel prices are the norm this time of year through Memorial Day. Then, on average, prices fade slightly through the summer, then decline in the Fall. Gold recently hit new highs, but we consider gold to be a risk asset, unlike Treasuries, which we consider to be a defensive asset. Gold has lagged the return of the S&P 500 over the past 1, 3, and 5 years. However, in the very short-term, gold’s momentum could continue based on historical patterns.

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.