The Week in Review: April 1, 2024
Last Year’s Rally Spills into 2024
Stocks turned in a surprisingly strong 2023, and momentum has yet to slow in 2024 as last year’s rally remains in high gear.
According to Dow Jones Market Data published by MarketWatch, the S&P 500 Index set 22 all-time closing highs this year. Likewise, the Dow notched 17 closing records, and the Nasdaq Composite recorded four new closing highs.
There’s been no shortage of chatter that a few large companies have fueled the advance, while many other firms have failed to participate or have lagged the broad-market indexes.
Well, that appears to be changing. The S&P 500 Index is a market-capitalization-weighted index, which simply means that large companies have a greater influence on the index than smaller companies. Last year, a few large companies played a key role in the market’s advance.
However, if we equal weight all 500 firms, such a gauge also set multiple new highs in March, according to S&P Dow Jones Indices.
Further, according to the Wall Street Journal, ten of the eleven major sectors of the S&P 500 Index are up this year. That is to say, the rally has broadened.
Fueling the rally
What’s driving shares higher? Let’s review three major pillars.
Enthusiasm for AI has yet to wane. AI is aiding the tech sector.
The Federal Reserve is anticipating three quarter-point rate cuts this year. Yet, that’s below the six or seven-quarter-point rate cuts that investors were eyeing in January (CME Group).
Moreover, the modest rise in the yield on the 10-year benchmark Treasury since the start of the year has done little to dampen bullish momentum.
Investors aren’t opposed to lower interest rates, but the market doesn’t appear entirely reliant on a less restrictive Fed policy. Therefore, the expanding economy and rising corporate earnings appear to be doing much of the heavy lifting.The economy is defying expectations. A much-forecasted recession never materialized, and economic growth has fueled S&P 500 corporate profits, which rose 10% in the fourth quarter of 2023 versus one year ago (LSEG, formerly Refinitiv).
We recognize that past performance is no guarantee of what may happen down the road. Any number of unwanted surprises could change the narrative. We also recognize that even in a bull market, stocks can experience a decline.
But we also want to point out that when the S&P 500 Index rises by 8% or more in the first quarter, as it did this year, the index ends the year up 94% of the time, with an average gain of 9.7% over the next three quarters, per Dow Jones Market Data for S&P 500 performance since 1950.
Two for the Road
Founders Steve Jobs, Steve Wozniak, and Ronald Wayne created Apple Computer on April 1, 1976. Soon after the company was formed, Wayne sold his 10% stake in the newly formed Apple back to Jobs and Wozniak for $800. On March 15th of this year, that 10% stake would have been valued at $267 billion. - Dave Manuel and Macrotrends
Shelter is the primary reason why inflation remains elevated. It is the largest single component of CPI, representing over one-third of the index. Shelter CPI is a lagging indicator, only now reflecting the surge in housing inflation from 2021-2022, but with each passing month, we should be getting closer to the end of that lag. If we remove shelter from the index, CPI has increased only 1.5% over the last year which would be the 8th consecutive month below 2%. - St. Louis Fed, March 7, 2024 and Bilello.Blog, February 19, 2024
Please do not hesitate to contact me with any questions or concerns. I hope you have a wonderful week!
Bill Stordahl, CFP®
Managing Director
Stordahl Capital Management
This information should not be construed as investment, tax, or legal advice. This commentary reflects the personal opinions, viewpoints, and analyses of the Stordahl Capital Management, Inc. employees providing such comments and should not be regarded as a description of advisory services provided by Stordahl Capital Management, Inc. or performance returns of any Stordahl Capital Management Inc. Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this piece constitutes investment advice, performance data, or any recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Accessing websites through links directs you away from our website. Stordahl Capital Management is not responsible for errors or omissions in the material on third-party websites and does not necessarily approve of or endorse the information provided. Users who gain access to third-party websites may be subject to the copyright and other restrictions on use imposed by those providers and assume responsibility and risk from the use of those websites. Please note that trading instructions through email, fax, or voicemail will not be taken. Your identity and timely retrieval of instructions cannot be guaranteed. Stordahl Capital Management, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results
1. The Dow Jones Industrials Average is an unmanaged index of 30 major companies which cannot be invested into directly. Past performance does not guarantee future results.
2. The NASDAQ Composite is an unmanaged index of companies which cannot be invested into directly. Past performance does not guarantee future results.
3. The S&P 500 Index is an unmanaged index of 500 larger companies which cannot be invested into directly. Past performance does not guarantee future results.
4. The Global Dow is an unmanaged index composed of stocks of 150 top companies. It cannot be invested into directly. Past performance does not guarantee future results.
5. CME Group front-month contract; Prices can and do vary; past performance does not guarantee future results.
6. CME Group continuous contract; Prices can and do vary; past performance does not guarantee future results.