March 4, 2024
Good morning,
The equity market bonfire continued last week, although at a less torrid pace. The S&P 500 Index (SPX) was up +.95% on the week, with Friday’s +.80% move constituting the bulk of the week’s move. For all the heavy lifting that the large cap growth stocks (Mag 7) have done, it was the laggards turn to catch up a little last week. The S&P 500 Equal Weighted Index outperformed the SPX by +.22% on the week (a true rarity of late), and the small cap Russell 2000 Index jumped +3.00% last week, pulling itself out of negative territory on the year.
The challenges for the equity market are a little stiffer this week. Jerome Powell’s Congressional testimony on Wednesday and Thursday could move the needle further out on rate cut expectations by implying that the Fed could go less than implied by current guidance (dot-plot), and that the asset market love-fest is counterproductive to the ultimate achievement of the inflation mandate. Then there are the February payroll figures, released on Friday. Another multi-standard deviation beat (like the last one) on jobs and earnings might make some of those “Fed won’t cut this year” calls look a little more realistic. And that, in turn, could prove problematic for assets that have adjusted quite dramatically in price.
All that said, it is worth repeating that initial pullbacks following a parabolic move up are typically short and shallow.
Be well,
Mike
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