More New All-Time Highs

February 29, 2024

January was the 3^rd consecutive positive month for the S&P 500 as the traditionally strongest 3 months of the year were true to form.  Over the past 50 years February has been the second worst month for stocks as some take profits from the strongest period, so we came into the month with low expectations.  However, we underestimated the strength that would come from investor’s continued belief in the future of artificial intelligence.  All major indices hit new all-time highs during the month and the technology rally that has led the market to its most sustained rally in 50 years continued.  In addition, quarterly earnings reports came in bunches and were, for the most part, stronger than anticipated.  Economic growth with inflation, interest rates and oil all under control gave us a continuation of the Goldilocks scenario we have been experiencing.  At the end of the month the S&P 500 had gained 5.2% and is now 6.9% higher for the year.  Oil prices edged 3% higher during the month but gold was fractionally lower.  Stronger than expected CPI & PPI reports did push interest rates to the highest level since Thanksgiving, but they eased at month end when PCE came in as expected.  The star of the month was Bitcoin, surging 30% and closing in on the all-time high.

The month began on a Thursday, and despite cautious comments from the Federal Reserve corporate earnings drove the market 2.3% higher during the first two days of trading.  The market tends to struggle with big round numbers and after struggling at 5000 for a few days a strong earnings report from Disney helped the S&P 500 break through 5000 and it never looked back.  The first full week closed with the S&P 500 up another 1.4%.  During the second full week we learned inflation is once again starting to edge higher with CPI & PPI both stronger than expected, and that sent the interest rate sensitive tech sector down nearly 2% for its worst day in a year.  We also learned retail sales were unexpectedly lower in January, but the market shrugged that off as a temporary blip.  At the end of the week the S&P had given up .4%, which was only the widely followed indexes second down week in the last 4 months.  The following week was shortened by the President’s Day holiday, and it was all about Nvidia, which has arguably become the most important stock.  If AI is driving this market and Nvidia supplies the top-of-the-line AI chips, how they are doing has a lot to do with how the market is doing.  Early in the week the market did edge lower on nervousness about the company’s report, but when the report was excellent it was “rally back on” to new all-time highs.  The week ended with the S&P gaining another 1.7%.  The last 4 days of this leap year month were relatively quiet with the market edging modestly lower.

March has traditionally been a very typical month for stocks, gaining .6% on average and closing higher 61% of the time.  With that said, market valuations are very extended, and a pullback is not only overdue, but would help flush some of the excess out of the market.  We are in an environment where investors expect artificial intelligence to drive profits during a time when they also expect declining interest rates.  It is hard to imagine a catalyst that would drive stock prices noticeably higher in the short term, but it is also equally difficult, barring some headline making event, to see prices drop dramatically.  We believe the biggest risk to the market would be increasing inflation and rising interest rates as that would be contrary to the current thesis.  The S&P 500 has rallied 25% off the October ’22 low and we have been using the rally to harvest some of the gains.  Since we don’t currently see a big move up or down, we are using this period to make sure accounts are properly allocated to each client’s individual risk profile.

If you know someone who would be interested in learning more about Greenberg Financial Group, please contact us at 520-544-4909, or visit our website at www.greenbergfinancial.com. As always, the key to successful investing is to have a portfolio that is consistent with your investment objectives and risk tolerance. We invite you to listen to our weekly Money Matters radio show which airs every Sunday Morning from 8:00 AM to 10:00 AM on KNST AM 790.  You can also listen to us on iHeart radio, follow us on Twitter @gbergfinancial or on Facebook under Greenberg Financial Group.  Previous radio shows are available by going to www.iheart.com or using the iHeart app and typing Money Matters with Dean Greenberg.