Last week the S&P 500 took a bit of a breather. Let’s call it a pause to refresh given the stock market’s recent strength. The S&P’s step back last week was led by losses in tech stocks. Notably, Nvidia (NVDA) was down over 5% Friday, though it still gained over 4% for the week. Investor enthusiasm for artificial intelligence, especially captured in the explosive move higher by NVDA, remains high. In fact, NVDA's gain in market cap for 2024 is now over $1 trillion. This gain over the last 10 weeks is more than the entire current market value of Berkshire Hathaway!

It has indeed been an impressive run for the stock market in recent months. Did you know that S&P prices have moved higher 17 of the last 19 weeks? The last time that happened was in 1964. Stocks are not the only thing moving higher, though. Bitcoin continues to move sharply higher, and even gold broke out to new highs. Some of these price movements have been parabolic of late. When it comes to price movement like this, it is helpful to remember the counsel of market legend Bob Farrell, who said: “Parabolic advances usually carry further than you think, but they do not correct by going sideways.

Last week’s key economic report was the Nonfarm Payrolls for February. In the final analysis it was a mixed bag, but it basically confirmed the slow growth environment. Given the uptick in the unemployment rate to 3.9%, the net numbers probably helped more than hurt the expectations that the Fed will still cut short-term rates later this year. It’s remarkable that the economy is currently experiencing its longest stretch of unemployment below 4% since 1969.

This week is a big inflation week, with both the Consumer and Producer Price indexes being released. Expectations for the year-over-year change in CPI is 3.1%, with core CPI (ex-food and energy) at 3.7%. As always, this data has the potential to be market moving and expectation-shifting regarding Fed policy. Though inflation has been dropping in the big picture, some of the internal inflation measures are suggesting a tide shift higher. Could the moves in gold and bitcoin be related to a potential move higher in inflation again? That could be a factor. That said, though inflation is typically a short-term headwind for stocks, I believe it is still more likely that stocks will continue to move higher this year even if we do get another inflationary impulse. As Strategas’s Jason Trennert has said: “To the extent to which nearly 40% of the world’s population will face national elections of some sort this year, fiscal and monetary policy makers will have a strong incentive to seek policies to avoid recessions regardless of cost. The cost to avoiding a recession at all costs — inflation.” 

Bottom line:


Stay invested. Stay diversified. Stay disciplined.


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The views expressed herein are exclusively those of Orion Portfolio Solutions, LLC d/b/a Brinker Capital Investments a registered investment advisor, and are not meant as investment advice and are subject to change.
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