Watch the CPK Market Action Report: February 2024
The S&P 500 set its first new all-time high in two years. In fact, the index set six new all-time closing highs during the month of January. Will February live up to its reputation of being one of the worst months of the year for the market or will strong economic data and the continued expectation of interest rate cuts keep the bullish momentum intact?
Watch the Market Action Report now:
Market Action Report
February 2024
INTRO TAG
The S&P 500 set its first new all-time high in two years. In fact, the index set six new all-time closing highs during the month of January. Will February live up to its reputation of being one of the worst months of the year for the market or will strong economic data and the continued expectation of interest rate cuts keep the bullish momentum intact?
That action starts now!
INDEX PERFORMANCE RECAP
Stocks marched higher after their strong finish to 2023. For the month of January, the S&P 500 advanced 1.59%, the Dow Jones Industrials finished 1.22% higher and the Nasdaq Composite also gained 1.02%
EQUITY UPDATE
Stocks continue to rally on strong economic data and earnings beats. The Magnificent 7, less Tesla, posted an average gain of 5.58% and accounted for 71% of the S&P 500’s January performance. With almost half of the earnings in, results were stronger than expected and sales were up 4.6% year over year to a record $4 trillion for 4th quarter 2023. Consumers continue to keep spending and charging along with the government with more expected from Washington.
It's important to note that whenever the S&P 500 sets a new high in January, additional new highs were set in February 74% of the time. When new highs have been set in both January and February, the full year return averaged just over 15%.
BOND UPDATE
Bond yields all rose slightly for the month. The 5yr settled in at 3.88% while the 10 yr and 30 yr closed at 3.96% and 4.21% respectively.
Month-end economic data and fear over the New York Community Bank pressured the 10 yr back below 4% for the first time in several weeks. However, the banking issue seems to be specific to this bank and not systemic to the industry. As such, it is likely we will see a rebound in the 10yr yield in the coming days.
COMMODITY UPDATE
March WTI Crude rose steadily all month and closed out at $75.85/barrel. Bottom line, with production in North Dakota coming back online quicker than many traders anticipated, the mixed headlines and still relatively weak consumer demand for refined products figures, the data warranted a “sell the news” reaction. On the charts, the early 2024 uptrend in oil futures is still intact as the market revisits the highs from earlier in the year near $75/barrel, which should now act as support in the sessions ahead.
January High Grade Copper dipped lower for the first half of the month before reversing course to close higher at $3.90/oz. $3.95 is still the key level to beat for copper and economic bulls.
Much like Copper, Gold also fell during the first half of the month to close lower at $2,048/oz. The fact that we have seen real interest rates roll over in the wake of the Fed/Treasury Refunding is a positive for risk assets, the economy, and bull case for gold as elevated real rates dent the appeal of gold as a safe haven. Looking ahead, $2,030 to $2,050/oz. should offer support while the high close of $2,089 from December will be in the bulls’ sights.
CURRENCY UPDATE
The dollar spiked higher mid-month to close out at $103.08. The dollar had been declining due to markets pricing in an all, but certain March rate cut by the Fed. However, that certainty is being dialed back now and as such you are seeing the greenback rally. If May rate cuts start to come into doubt, expect the dollar to rise even further towards the 105 level. This would definitely be a headwind for stocks.
ECONOMIC UPDATE
As we start February, broadly speaking, the economic data in totality showed an economy that remains resilient but that also is increasingly showing signs of plateauing. That, on its own, isn’t a bad thing for markets and the lackluster data helped push yields lower. But it also means that we need to stay vigilant for any signs that growth starts to outright slow.
Bottom line, data supports the case for a soft economic landing and a steady path lower for Fed policy rates into the end of 2024, both of which are favorable for stocks and bonds in the medium term as long as the economic trends continue the way they are.
THE WRAP
Although earnings and economic reports remain fairly solid for now, I continue to proceed with a more cautious approach towards investing until some of the more dangerous risks are removed or mitigated.
CPK FOCUS
For the month of February, 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.
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 February 2024 Market Action Report. Thanks for joining me. It’s time for me to get back to the markets.
And that action starts, NOW!