Economic Data and Market Highlights
Global stocks were slightly negative for the week with the MSCI World falling 47 basis points. International stocks receded MSCI EAFE fell 1.32%. Japan, the largest weight of that benchmark at 23.66%, plunged 2.47% in USD terms on the week. The MSCI EM benchmark fell 12 basis points. The S&P 500 was down slightly (nine basis points). US small cap names fell approximately 2% .The Bloomberg Aggregate Bond Benchmark fell 1.23%. The 10-year bonds sold at auction for 4.17%, slightly higher than the previous 4.09%.
The S&P 500 is up over 25% in the last five months, which has only occurred 10 times since the 1930s per Bank of America research. The index has made 17 record highs this year and is the most in any quarter since 1945 per CFRA research data. Investor sentiment continues to remain high as the spread between bull and bears is in the 91st percentile relative to historical norms.
PPI released on Thursday was higher than forecasted, the largest spike since August, mostly related to goods. Services however were still positive but more subdued.
Retail sales grew in February, albeit much slower than the previous month. E-commerce grew at 2.3%, but the rate of growth was below the longer-term average.
The European Union’s Parliament on Wednesday approved the world’s first set of regulation ground rules around Artificial Intelligence. The Act divides AI technology into different risk categories; unacceptable, which would ban the technology, followed by high, medium, and low hazard. The legislature is expected to go into effect in May after passing final checks and endorsement from the European Council.
Semiconductor growth after falling almost 11% in 2023 has rebounded significantly largely due to strides made in AI. Expectations for growth range from 15%-20% in 2024 with more moderate growth (10%-15%) in 2025. With export controls in place in the US, which will likely stay the same or get stronger based on the upcoming presidential election, could possible create more growth in the space. China has already allocated $150 billion to help steady and grow its own production, according to the WSJ. This far surpasses the growth in other countries.
As the table above shows, Core CPI, reported on Tuesday, came in hotter than expected. This is the second straight month that inflation data has come in hotter than expected. The market rose despite the news as it still anticipates multiple rate cuts toward the end of the year but none are expected this upcoming week as the Fed meeting ends on Wednesday with a Fed press conference. Jobless are expected on Thursday with a modest rise from the previous month.
Authors:
Jon Chesshire, Managing Director, Head of Research
Michael McNamara, Analyst
Sam Morris, Analyst
Data Source: Apollo, Barron’s, Bloomberg, BBC, Charles Schwab, CNBC, the Daily Shot HFR (returns have a two-day lag), Goldman Sachs, Jim Bianco Research, J.P. Morgan, Market Watch, Morningstar, Morgan Stanley. Pitchbook, Standard & Poor’s and the Wall Street Journal.