Last week was another fascinating week in the markets. It also ended a difficult month, but will the April showers bring May flowers? Depending on the economic data du jour, it seemed like most days last week (and recent weeks for that matter) investor sentiment zig and zagged regarding whether to be risk-on or risk-off, whether the economy was growing or slowing, if inflation was falling or rising or whether the Fed would cut or raise short-term interest rates next. Last week was the end of a tough month. Notably, while the stock market is still holding onto gains for the year, the bond market, at least looking at the Aggregate Index, is down on the year. The overall bond market is also sporting a loss over the last year, 3-years and 5-years. And this is even before inflation factors into the real returns. It has been quite the bear market for bonds.
In the end though, again it was a good week for the stock and bond markets. Stocks rose about 1% and 10-year Treasury yields dropped from 4.6% to 4.5%. The latter was important, as the march to 5%+ yields has at least been temporarily halted. The key data last week was Friday’s employment data. While it still showed modest growth and another unemployment rate below 4% (the longest stretch of such readings in decades), it was below expectations, as was wage growth. Most economic growth data had been surprising to the upside not the downside in recent months, but last week was an exception. This, along with oil prices dropping yet again last week, seems to take away a few of the short-term pressure points for the stock and bond markets. Economic growth expectations also dropped last week for 2Q24 GDP to 3.3% (from 3.9%) according to GDPNow.
As for this coming week, it is a quiet week for economic data. We will get more corporate earnings data though. It has been a good earnings season so far. With 80% of the companies having now reported, the year-over-year earnings growth is projected to be 5%. If that holds, which it likely given that over 75% of companies have beat earnings expectations so far this earnings season, it will be the best quarter for earnings growth in nearly two years.
While some of the short-term storm clouds have dissipated of late, there are some interesting markets making some notable moves. We have recently written about commodity prices such as copper and what that might be signaling regarding higher-than-expected growth for the global economy. It is also notable that China and the emerging markets in general have been on a tear of late too. Are those sharp rallies just a dead cat bounce (i.e, just. short-term bounce in price before faltering again), or the beginning of something more substantial?
Either way:
Stay invested. Stay diversified. Stay disciplined.
If you have any questions or comments, please let us know at strategists@brinkercapital.com or at rusty@orion.com. Thank you for your time and trust. See you next week!