The first two months of 2024 ended with significant gains for the major stock market indexes. How significant? The S&P 500 Index posted gains in 16 out of the past 18 weeks for the first time since 1971.1 Additionally, when January and February both produce positive returns to start a year, the odds that gains will expand throughout the remainder of the year are very high.2
It seems like we are worlds away from the feeling of distress experienced in October 2023, when the 10-year U.S. Treasury yield surged to 5% and financial conditions were rapidly tightening. Since that point, inflation readings have fallen, interest rates declined and financial conditions have eased so much that Federal Reserve rate cut expectations have fallen from six cuts to three in 2024.3 This easing of financial conditions has helped fuel the equity market rally in conjunction with the fundamental strength witnessed in large-cap growth stocks. Animal spirits are expanding back into other areas of the markets, with Bitcoin, for example, rallying 44% in February.4
With inflation seemingly in check for now, this week’s economic calendar will shift its focus back to the jobs market where we will look for signs of persistent economic resilience.
Sources:
1Morningstar – S&P 500 scores gains last seen in 1971 as AI hopes fuel ‘second’ leg of rally; 3/2/24
2Carson Investment Research – A Higher January and February Could Mean The Bull Continues; 2/26/24
3Yahoo! Finance – Wall Street is pushing back its interest rate cut hopes; 2/23/24
4Yahoo! Finance – 1 reason for new bitcoin mania: 'Simply not enough' supply; 3/1/24
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