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Double-Digit Earnings Growth and Multiple Fed Rate Cuts Seem Incompatible

by Fortem Financial March 25, 2024

​​​​​​Equities posted their best weekly performance this year (S&P 500 +2.31%). The rally was sparked by dovish takeaways from last week’s Federal Open Market Committee meeting. Best sectors were communication services (+4.78%) and technology (+2.94%); worst sectors were real estate (-0.38%) and healthcare (+0.40%).

 

Double-Digit Earnings Growth and Multiple Fed Rate Cuts Seem Incompatible

 

We expect sticky consumer inflation and resilient economic growth to eventually force the Fed to pivot to a less dovish stance. Given recent data, it is odd to see such persistent dovishness, particularly since the Fed so badly missed the upside in the inflation and economic outcomes since 2021. The dovish bias is the consequence of an entrenched belief that all roads lead to 2% inflation. Although the Fed may still cut rates this year, either resilient growth and firming inflation will force the fed to abandon cuts thereafter, or an economic slowdown will cause earnings to disappoint.

 

Conclusion:

Further near-term upside is probably in risk assessment markets as momentum indicators continue to flash green lights. Monetary conditions are not restrictive but most central banks are determined to ease policy as soon as possible. Inflation has proven sticky. Its unlikely the markets can enjoy both double digit-earnings growth and Fed rate cuts.

Source: Bob Doll Crossmark Investments

 

Market and Index Changes for the Week Ending 3/22/2024

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments. Data provided by Refinitiv.

 

Sincerely,

Fortem Financial
(760) 206-8500
team@fortemfin.com

 

 

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Brian Amidei, along with Partners Joseph Romano and Brett D'Orlando have also been named *2014, 2015, 2016, 2017, 2018 Five Star Wealth Managers!

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The Five Star Wealth Manager award is based on 10 eligibility and evaluation criteria: 1) Credentialed as an investment advisory representative (IAR) or a registered investment advisor; 2) Actively employed as a credentialed professional in the financial services industry for a minimum of five years; 3) Favorable regulatory and complaint history review; 4) Fulfilled their firm review based on internal firm standards; 5) Accepting new clients; 6) One-year client retention rate; 7) Five-year client retention rate; 8) Non-institutionalized discretionary and/or non-discretionary client assets administered; 9) Number of client households served; and 10) Educational and professional designations. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or the magazine. The award methodology does not evaluate the quality of services provided. Additional information about this award is available at: fivestarprofessional.com/2016FiveStarWealthManagerMethodology.pdf
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