Recent economic data indicates that inflation is steadily falling. May core CPI came in cooler than expected (+0.3% for the month and 3.5% annualized), the softest increase since August 2021, while the core Producer Price Index (PPI) and import prices were also below consensus. The Personal Consumption Expenditures Price Index (PCE) report (the Fed’s preferred measure of inflation) also showed inflation slowing. The 12-month core reading was 2.6%, down from 2.8% in April. The June Federal Open Market Committee (FOMC) meeting ended with no change to the benchmark rate of 5.25%-5.50%, a level ..read more

The major U.S. stock indices all posted gains in June. The Dow Jones Industrial Average advanced 1.1%, the S&P 500 rose 3.5%, and the Nasdaq Composite jumped 6%. Analysts expect profits from companies in the S&P 500 to grow 11% this year, with every sector except energy and materials showing an increase, according to FactSet. Next year, they anticipate earnings will rise 14%, with the help of all 11 S&P 500 segments. The dividend yield of the benchmark S&P 500 is now below 1.3%. The S&P 500 Index equal-weighted is up 4.1% this year, while the S&P 500 Index that is cap ..read more

The major U.S. indices all posted strong gains in the month of May, rebounding from the declines seen during April. The Nasdaq Composite increased 7.0%, the S&P 500 added 5.0%, and the Dow Jones Industrial Average rose 2.6%. A combination of strong corporate earnings, especially in the technology sector, and a decline in bond yields led to the positive returns.  Corporate revenues and earnings came in better than expected in Q1. The S&P 500 posted Q1 revenue growth of 4.1% year-over-year and Q1 EPS growth of 8.4%. The healthy gains were driven by the “Magnificent-8” stocks (Alph ..read more

The major U.S. stock indices were down in April, with major indices giving back some ground after the notable gains in the first quarter of 2024. The Dow Jones Industrial Average dropped 5.0%, while the S&P 500 decreased 4.2% and the Nasdaq Composite fell 4.4% during the month.  With ~50% of S&P 500 companies reporting results for the first quarter of 2024, 77% have reported a positive earnings surprise and 60% of companies have reported a positive revenue surprise. Meanwhile, the blended earnings growth rate for the S&P 500 stands at 3.5%, this compares to the first quarter ..read more

At the Federal Reserve’s most recent meeting on May 1st, the Federal Open Market Committee (FOMC) held interest rates steady in a range of 5.25% and 5.50% — its highest level in two decades. The Fed acknowledged the recent inflation setbacks, and signaled its wait and see stance could last well into the year. Fed Chair Jerome Powell also noted that he didn’t think it was likely the Fed would need to consider interest rate increases, and even suggested that rate cuts could begin if the labor market weakened unexpectedly. Separately, the central bank approved plans to slow the pace of reducing ..read more

Strong performance in risk assets continued through March, with the S&P 500 posting a +3.10% return, the Dow Jones +2.08%, and the NASDAQ (uncharacteristically in recent quarters) trailing with a +1.79%, for the month.  With quarterly earnings results complete for the year ending 2023, the positive start to the year is little surprise, given strong earnings and economic data. Revenues for the S&P 500 grew 6.2% in Q4 2023, while earnings per share rose 7.6%, both compared to the prior year’s close. Another strong year for business to close 2023. The S&P 500 has experienced a ..read more

Signs of a slightly cooling job market continue, despite fits and starts in the numbers. Non-Farm payrolls ending in February added 275,000 jobs, far higher than expected, while December and January job adds were revised down after initial postings. More importantly, the unemployment rate jumped from 3.7% to 3.9%, the highest rate since January 2022. Measured labor market rebalancing is underway, as the Federal Reserve pointed out in recent meetings, anticipating moving to 4.1% to close 2025. Wage growth has slowly ticked down, coming in at 4.3% last month. If these labor trends continue, th ..read more

Equity indices climbed again in February and now have made gains in four consecutive months. The Dow Jones grew by 2.2%, the NASDAQ advanced 6.1% and the S&P 500 increased 5.2%. New highs are accompanying these moves and the S&P 500 is trading above 5,000.  As the Federal Reserve has sought to rein in expectations for interest rate reductions, yields on bonds rose in February. The yield on the 2-year Treasury increased by 0.41% while the 10-year Treasury yield was higher by 0.29%. When yields rise, bond prices decline. Fixed income returns trailed those for equities during the mo ..read more

The U.S. economy ended 2023 with growth. Counter to fears of an upcoming recession, we forecast economic growth to continue in 2024. The final reading for fourth quarter (Q4) Gross Domestic Product (GDP) came in at 3.2%, marking the sixth quarter in a row of U.S. GDP growth above 2.0%. Amid low unemployment and wage gains, growth in Q4 was driven by a 3.0% increase in consumer spending, including a strong holiday shopping season. Overall in 2023, U.S. GDP growth was 2.5%. Our forecast for Q1 of 2024 is for an increase in GDP of 2.0% – 2.5%. After Q1, we expect growth to decelerate due to the ..read more

Equity markets rose in January as the New Year followed a pattern established last October. The Dow rose 1.2%, the S&P 500 notched a 1.6% increase and the NASDAQ moved 1% higher. The indexes are registering all-time highs amid a strong earnings season and a boom in technology spending. Returns from bonds remained mostly flat, month-over-month, with the persistence of an inverted yield curve. As we approach a Fed rate cut, we are likely going to witness the short end of the curve move down repeatedly. Unlike the Large and Mega-Cap indexes, small capitalization companies pulled back, in ag ..read more