In Markets "In a Nutshell"

Markets “In a Nutshell” for February 26, 2024

Investment Week at a Glance

Stocks finished higher for the week.  The Dow Jones Industrial Average rose 1.3%, the S&P 500 was up 1.70%, and the NASDAQ rose 1.40%. Foreign stocks (MSCI EAFE) were also up, rising 1.40%. Bond prices were up for the week, with the 10-year U.S. Treasury ending the week at 4.25%.  (Data source: Wall Street Journal)

Market Continues to Move Higher

The S&P 500 made another all-time high last week as we work our way through earnings season. There has not been much economic data the past week and therefore markets have been focused on earnings reports which have mostly beat expectations. The market looks to be in a strong position as earnings are on the rise, a recession has been avoided so far, and Fed rate cuts should come at some point this year. Markets have been able to carry the momentum from last year into the start of this year as the S&P 500 is already up over 6% and we aren’t even two months into the year. The market has been on a relatively smooth ride up since October despite rate cut expectations getting pushed back. Investors are hoping this ride-up will continue but know there is typically more choppiness than what we have recently seen.

Earnings and Market Correlation

The market takes a lot of data and prices it in on a daily basis, but historically earnings are what drives the market. Over the last 30 years, the S&P 500 has increased by over 900%, and earnings per share has also increased by 900% over that same time period. This shows the importance of earnings season and why markets have been able to move higher as earnings increase. Some people have said that this rally looks a lot like the tech bubble in the 1990s but the difference is the companies driving the market made $250 billion last year. In the tech bubble, many companies were losing money and seeing their stock prices skyrocket. The tech bubble also saw annual returns exceeding 20% from 1995-1999 before the crash. This is not to say we won’t see a pullback, but it is not set up to send the overall market into a deep dive as we saw with the tech bubble.



How much did the NASDAQ rise between 1995 and its peak in March of 2000? (Scroll Down for Answer)

  1.     200%
  2.     400%
  3.     600%
  4.     800%
















Answer below.



Have a Great Week!

















4.    800%.  The NASDAQ rose 800% only to fall 78% from its peak by October 2002, giving up the massive gains.