Watch the CPK Market Action Report: April 2024
Once again, the Dow Jones Industrials and the S&P 500 both posted all-time new highs for the month of March. Will the broadening rally continue for the rest of the year or will higher rates for longer dampen investor enthusiasm.
Watch the Market Action Report now:
Market Action Report
April 2024
INTRO TAG
Once again, the Dow Jones Industrials and the S&P 500 both posted all-time new highs for the month of March. Will the broadening rally continue for the rest of the year or will higher rates for longer dampen investor enthusiasm.
That action starts now!
INDEX PERFORMANCE RECAP
Stocks continued their climb higher last month. The S&P 500 gained another 3.06% and posting its strongest first quarter since 2019 and 14th strongest since 1928. The Dow Jones Industrials finished 2.08% higher while the Nasdaq Composite increase just 1.67%.
EQUITY UPDATE
As we start the 2nd quarter of 2024, it is important to note, the S&P 500 has rallied more than 10% in Q1 and has gained more than 28% since the October 27 low. That’s a 28% return in five months, or an annualized return of nearly 60%. One doesn’t have to have a lot of experience in the markets to think that type of pace is unsustainable and it’s reasonable for all of us to expect an uptick in volatility sometime over the coming months. That doesn’t mean the rally will end, but it does mean more volatility.
BOND UPDATE
Bond yields moved slightly higher for the month. The 5yr closed at 4.22%, the 10 yr at 4.20% and the 30 yr at 4.34%. The 3.75%-4.25% “stock positive” trading range for the 10-year yield remains intact and until it breaks out one way or the other (higher or lower) yields will not interrupt the stock rally. It will take very strong or weak economic data or surprisingly hawkish or dovish commentary to push the 10 year out of this range.
COMMODITY UPDATE
May WTI Crude spiked higher for the month closing out at $83.17/barrel. The ongoing geopolitical tensions between Russia and Ukraine as well as Israel and Gaza, strong domestic demand, and OPEC+ reiterating its commitment to supply cut policies currently in place from now through the early summer all support the fundamental bull case for oil near-to-medium term. On the charts, the trend is solidly positive with futures ending Q1 at the highest point since late October.
April High Grade Copper initially pushed higher before pulling back to close right at $4.00/oz. At month-end, details emerged surrounding the proposed 5%-10% production cut by Chinese smelters for the second quarter. This new “OPEC-like” influence on the supply of copper is a gamechanger from a fundamental analysis standpoint and will leave the industrial metal a less effective real-time indicator of global economic health.
Gold posted its best monthly performance in 3 years closing out at $2,217.40/oz. For now, the primary risks to the gold rally include hot inflation data, hawkish Fed speak and a dollar breakout.
CURRENCY UPDATE
The dollar continued its rise in March closing out at $104.26. In the first couple trading days of April, the Dollar Index broke above $105 as investors are starting to price in the potential that the ECB cuts rates in June and that the Fed does not cut rates in June. That’s the reason for the dollar rally. It’s important to note, rising yields and a stronger dollar are headwinds that would likely cause a pullback in stocks, and we know this because that’s what caused a decline in markets last August-October. If the Dollar Index breaks materially above 105 and towards 106 and the 10 year moves towards 4.50%, that will likely increase market volatility and hit stocks. Especially small caps, consumer and REITs.
ECONOMIC UPDATE
The ISM report, released April 1, was a “hot” economic surprise between the unexpected expansion in the manufacturing sector and the spike to near two-year highs in the price component of the release. Markets responded accordingly with Treasury yields surging higher as investors dumped bonds while stocks came for sale, retreating from last Thursday’s record closing high. The March ISM report was just one data point; however, concerns about a resurgence in inflation have been on the rise and the potential for a higher-for-longer Fed policy stance has been increasingly weighing on risk assets in recent weeks. And the latest ISM report unfortunately did not help ease those worries to start the second quarter.
THE WRAP
April is traditionally one of the stronger months for stocks and with 70% of the stocks in the S&P 500 up year to date, the momentum is very strong now. That being said, there are plenty of catalysts I mentioned in this video that could potentially cause a pullback in equity markets in the coming months.
CPK FOCUS
For the month of April, our models continue to hold a 50% allocation in the money market due to the current economic environment and the overbought position of the market itself.
Our broad focus remains on Domestic Equities and International Equities.
Our focus in Domestic Equities is on Large Cap Growth, Large Cap Blend and Mid Cap Blend with an emphasis on Technology, Industrial, Consumer Cyclical, Financials and Communication Services.
In International Equities, our focus is still on Europe Emerging, Latin America and Europe Developed.
CPK DISCLAIMER
As a reminder, my current allocation is not a recommendation. Regardless of what happens next, investors like you need to have a simple and yet solid financial plan that reduces RISKS, COSTS and TAXES while securing the necessary income you need to maintain your lifestyle throughout retirement.
If you don’t have a plan OR you’re not comfortable with the plan you currently have, call me today to get pointed in the right direction.
I’m Chad Kunc and that puts a wrap on the April 2024 Market Action Report. Thanks for joining me. It’s time for me to get back to the markets.
And that action starts, NOW!