Economic Update 2-20-2024
- Economic data for the week was mixed, including disappointments in retail sales and industrial production. Consumer and producer inflation both came in higher than expected, while housing data was mixed, with fewer starts but stronger builder sentiment.
- Global equities saw gains last week, despite mixed economic data. Bonds fell back as interest rates ticked higher along with higher-than-expected inflation data. Commodities were little changed, with crude oil prices only slightly higher.
U.S. stocks started decently but ran into the wall of CPI inflation on Tuesday morning, which showed less improvement than expected. However, weaker retail sales helped the slowing growth narrative, as the timing and depth of interest rate cuts have been the primary concerns of markets over the past several weeks. While there were a variety of factors related to the new year, stickier prices could cause the Fed to delay the implementation of rate cuts further into the year.
By sector, energy and materials earned gains of over 2% last week, while technology fell back by over -2%. Real estate was little changed, despite the higher interest rates over the week. Small cap stocks also outperformed large caps, with cheaper valuations there finally seeing more media coverage.
Foreign stocks outperformed U.S. stocks for the week, with gains in the U.K. and Japan outperforming minimal change in Europe. In contrast to the U.S., inflation showed better signs of easing, with the U.K. having fallen into recession in Q4 and the Bank of England poised to cut rates. In Japan, while corporate earnings have come in decently, economic growth has been somewhat weaker than expected, hovering around recession levels for Q4 as well. Chinese markets were closed for the Lunar New Year holiday, but U.S.-traded ETF assets traded higher.
Bonds were held back last week by rising interest rates—again related to the stronger inflation data, which pushes out the expected Fed easing regime. U.S. government and investment-grade corporates declined to similar degrees, while floating rate bank loans earned a small gain. Foreign bonds were generally down, along with a stronger dollar.
Commodities were little changed in total, with gains in industrial metals offset by a decline in agriculture. Crude oil prices rose 2% last week to $78/barrel, as still-high U.S. and OPEC+ production has offset any risk premium from conflict in the Middle East, coupled with slower demand. Natural gas prices declined -10% along with less severe winter weather.
|
Period ending 2/16/2024 |
1 Week % |
YTD % |
|
DJIA |
0.02 |
2.76 |
|
S&P 500 |
-0.35 |
5.15 |
|
NASDAQ |
-1.31 |
5.18 |
|
Russell 2000 |
1.17 |
0.40 |
|
MSCI-EAFE |
1.47 |
1.04 |
|
MSCI-EM |
2.11 |
-0.65 |
|
Bloomberg U.S. Aggregate |
-0.55 |
-2.01 |
|
U.S. Treasury Yields |
3 Mo. |
2 Yr. |
5 Yr. |
10 Yr. |
30 Yr. |
|
12/31/2023 |
5.40 |
4.23 |
3.84 |
3.88 |
4.03 |
|
2/9/2024 |
5.44 |
4.48 |
4.14 |
4.17 |
4.37 |
|
2/16/2024 |
5.44 |
4.64 |
4.29 |
4.30 |
4.45 |
Sources: LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Kiplinger’s, Marketfield Asset Management, Minyanville, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Rafferty Capital Markets, LLC, Schroder’s, Standard & Poor’s, The Conference Board, Thomson Reuters, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research. Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends. Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.