This week’s initial estimates of 1Q24 GDP revealed a complex picture. At the start of the year, expectations were set for gradual declines in growth and inflation. However, the data showed a sharp deceleration in headline growth while inflation, as measured by the personal consumption expenditures price index (PCE), accelerated on a quarter-to-quarter basis. This has raised concerns about potential stagflation and its implications on interest rates and markets.

In recent weeks, uncertainty surrounding the macroeconomy and geopolitics has weighed down share prices, most visibly those of banks, semiconductors, and software companies, particularly small-cap stocks. Overall, price volatility has increased. In such an environment, investors would do well to stay with leading companies with proven earnings and cash-flow track records.

The Institute of Supply Management (ISM) conducts a monthly survey that focuses on the manufacturing industry. The survey shows the New Orders index climbed above the key 50 threshold in January 2024, the first time in 16 months. The rise above 50 indicates that manufacturing activity may be starting to expand again, but it also provides insight into corporate earnings.

This week, the BLS reported that the Consumer Price Index (CPI) gained 0.4% on a monthly basis, which was stronger than what investors had anticipated and on par with the prior read. Investors are concerned that with inflation proving resilient, the Fed might decide to implement fewer rate cuts than hoped for and later this year than expected. The consensus on Wall Street is that the Fed may only reduce interest rates in one or two increments in the year's second half.

In 2024, the S&P 500 index had a return of over 10% for the second quarter in a row, resulting in the setting of multiple new all-time highs. In this recap, we will review the first quarter, discuss the strong start of the stock market in 2024 and provide an overview of what to expect for the rest of the year.

Despite stronger-than-expected inflation data for January and February, Fed Chairman Jerome Powell anticipates cuts to short-term interest rates in the second half of this year. Indications are that the domestic economy remains healthy, but growth is easing. Though employment has proven resilient, new hires and wage increases are slowing.

You have likely seen headlines and news reports discussing artificial intelligence as a major technological advancement. Two notable themes emerge: (1) companies have been discussing AI for over a decade, and (2) the recent number of mentions around AI is slowing.

Stocks traded higher in February, with the rally broadening after large cap stocks accounted for most of January’s gains. The S&P 500 traded above 5,000 for the first time, setting a new all-time high, and has now returned +21.5% since the start of November.

This week saw the release of the minutes from the latest Federal Open Market Committee (FOMC) meeting held on January 30–31, 2024. Federal Reserve officials were concerned about upside inflation risks, driven by still strong demand. Overall, the FOMC minutes were more hawkish than dovish concerning potential near-term monetary policy decisions.

The initial data releases for January paint a picture of a sluggish start to 2024. While job growth showed resilience, there were concerns about consumer spending and industrial output. Our take is that the growth rate is slowing as the lagged effects of tightening work through the system. However, without a sharp deceleration in the data, the U.S. appears unlikely to enter a recession in 1H 2024.

The US unemployment rate is currently 3.7%, which is low compared to historical standards. This is notable considering that during the past two years, the U.S. economy experienced one of the sharpest rises in interest rates on record. Why does the unemployment rate remain low today?

This week, we recap several macro events, including the Standard & Poor’s 500 (S&P 500) closing above the 5,000 mark, a new milestone for the US market. In addition, the US Bureau of Labor Statistics (BLS) released a strong January jobs report, which showed that 353,000 jobs were created in January, far exceeding the analyst’s forecast of 185,000.