Last week was one of the best weeks for the stock market this year. Barring something jarring this holiday-shortened week, this could be the best first quarter for the stock market since 2019. Given the historical experience that the first quarter of presidential election years tend to be weaker than average, it’s definitely been an impressive start to the year for investors. One key factor for gains last week was investors’ response to the latest Federal Reserve meeting. The Fed didn’t change short-term rates, which was expected, but investors liked the Fed’s confirmation that they are still likely to cut short-term interest rates later this year. 

Should investors bank on that thought though? While the Fed did state that rates had likely peaked in their current opinion, they also updated their economic projections for later this year. This included their expectations that the economy would be stronger, the unemployment rate would be lower, and that inflation would be higher than they had originally thought. Those aren’t exactly conditions for rate cuts! Especially given that the labor market backdrop, at least when looking at the unemployment rate staying below 4%, has been the best since the 1950s and that inflation is starting to move higher again and away from the Fed’s preferred 2% target. 

Oh, the stock market is also at all-time highs (with record high, or nearly record high, valuations). Have you also seen the commodity charts lately? Gasoline prices are well above their highs from late last year, and that’s before the summer driving season even begins. Gold prices have surged to new highs. Copper prices have also recently surged to new highs. Also last week existing home sales had their best month of sales in over a year. Housing appears to be bottoming out after two tough years – just in time for this spring’s selling season. And perhaps the most significant of all is something we haven’t seen in 17 years – Japan raising short-term rates last week. All else being equal, this suggests a weaker US dollar, which in turn could also add to inflationary pressures. In sum, should investors be relying on the Fed’s projections (which in hindsight have been notoriously inaccurate), or the higher growth and inflation numbers?

Though the market is closed Friday, the week’s biggest economic release is the Fed’s preferred inflation gauge, Personal Consumption Expenditures (PCE) on Friday. The current expectation is for Core PCE (ex-food and energy) to be +2.8% year-over-year. Also key to watch this week is the movement in longer-term interest rates. Though rates did fall last week, the 10-year Treasury yield is still knocking on the door for new highs for the year. 

Bottom line, the stock market is in a bull market, so remember:


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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Compliance Code: 0 7 2 0, Brinker Capital Investments, March 25, 2024.