weekly market update 3/1/2024

Thursday’s PCE inflation report was in line with expectations and markets celebrated, as concerns around inflation ramping back up receded.  As a result, risk assets broadly moved higher, and the market action felt as though bears stopped fighting and started chasing.  The S&P 500 has now risen 16 of the last 18 weeks and has closed higher four straight months.  However, the enthusiasm wasn’t limited to the S&P 500, as gold and particularly bitcoin, enjoyed strong weeks and are quickly approaching their all-time highs.  Even oil got in on the action as WTI crude tested $80 a barrel, its highest levels since early November.  Investor sentiment per the CNN Fear & Greed Index is now in extreme greed territory, but momentum is a very powerful force.  Next week will be highlighted by the February jobs report on Friday.

EARNINGS DRIVEN

Underlying this year’s strength in the S&P 500 has been a very solid fourth quarter (Q4) earnings season.  Roughly 98% of the index has now reported and earnings growth is on pace for about 4% year-over-year growth.  As a result, S&P 500 earnings will grow for the second consecutive quarter after declining from Q4 2022 through Q2 2023.  Furthermore, analysts have made smaller cuts to earnings estimates for the next earnings season than their 5, 10, 15, and 20-year averages (per FactSet).  The S&P 500 is now trading at a forward price-to-earnings ratio around 20, which is higher than historical averages, so ideally earnings growth continues.

Ian G. Browning, CFA
Managing Director, Investment Strategies | Shareholder

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