In Markets "In a Nutshell"

Markets “In a Nutshell” for April 22, 2024

Investment Week at a Glance

Stocks finished lower for the week. The Dow Jones Industrial Average was flat, the S&P 500 was down 3.00%, and the NASDAQ fell 5.50%. Foreign stocks (MSCI EAFE) were also down, falling 1.80%. Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 4.62%.  (Data source: Wall Street Journal)

Market Pullback

The S&P 500 had a 6-month run higher which saw stocks go up 25%, almost with no bumps in the road. Now we are seeing some increased volatility over the past 3 weeks as the S&P 500 is down 5.5% and the NASDAQ is down 7%. Rate-sensitive areas of the market are the ones getting hit the hardest, small-cap stocks are down nearly 9% from their highs. Market volatility after a strong 6-month rally is not unexpected and is typically healthy for the market in the long run. These corrections typically aren’t anything to worry about, but rather to look for opportunities created by these pullbacks. This pullback has been caused by higher rates and tension in the Middle East which puts pressure on oil prices. If these risks begin to lessen, you could see markets rally higher once again. If rates continue higher or a larger war in the Middle East breaks out, it could cause markets to move lower.

What Do Higher Rates Mean for the Fed?

Going into the year, the market had priced in 6 rate cuts throughout 2024. Although 6 rate cuts were optimistic, it is beginning to look like we might be lucky to get 2. Inflation data has not been coming down as much as the Fed had hoped in recent months and the economy has continued to be strong. While a strong economy is good, it is not good for rate cuts as typically the Fed cuts rates when we see the economy beginning to show some weakness. There have now been economists who say there is a risk that the Fed doesn’t even cut in 2024 at all. The trend would support that as well as in just 4 months we have gone from 6 expected cuts, to only 2 expected cuts with the first being in September. The one variable for rate cuts is that it is an election year and politicians want rates lower to increase their likelihood of reelection.


What is the return for the Bloomberg Global Bond index for 2024?  (Scroll Down for Answer)

  1.    3%
  2.    1%
  3.    -1%
  4.    -4%






















Answer below.



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4.    -4%.  Bonds have continued to struggle in 2024 as rates continue to rise. When rates rise, bonds decrease in value, when rates fall, bonds will rise in value