Friends
The stock market is off to a horrible start here in the second quarter of 2024 as market participants are becoming weary given the bullish narrative of Fed rate cuts continues to dissipate. Coming into 2024 there was a common belief that the Fed could lower the Fed Funds rate as many as 6 times (6 quarter point cuts bringing the Fed Funds rate back near 4%) in calendar year 2024. Now as we move into the second quarter, expectations have dropped to a possible 2 or 3 rate cuts in 2024 (and some pundits are indicating that maybe we won’t see any rate cuts in 2024). Sure, the economy has held in, employment continues to be helpful, and earnings have been fine, but where are the rate cuts!
As for today, by the close the Dow Jones Industrial Average was down 395 points to finish the day at 39,171. The S&P 500 was down 37 points to close at 5,205. The Nasdaq Composite Index was down 156 points to close at 16,240. Gold was up $38 to trade at $2,295 per ounce, while oil was up $1.43 to trade at $85.14 per barrel WTI.
Do we need rate cuts for stocks to move higher? That is the questions that market participants are asking at the moment. My guess is that as long as the belief is that the next move in monetary policy is accommodative (lower rates), the environment for stocks could remain supportive. If inflation would start moving higher and force the Fed to abandon any thoughts of accommodation, then stocks would likely face formidable headwinds. Stay tuned.
Have a nice evening everyone.
Jim
