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Perspectives

Will the Desired Soft Landing Materialize?

by Fortem Financial October 1, 2024

Stocks advanced again last week (S&P 500 +0.64%) as the equal-weighted index continued to outperform the cap-weighted index. The big stories last week included the China stimulus and a respectable core PCE report. The best sectors were materials (+3.39%) and consumer discretionary (+1.75%); the worst sectors included healthcare (-1.11%) and energy (-0.82%).​​

 

  1. The U.S. economy is beginning to struggle due to high price levels, high and rising consumer debt, and, in many industries, high inventories.
  2. The path to the U.S. soft landing remains to get previously impaired sectors of the economy to turn up before labor weakness causes spending to struggle.
  3. The vast majority is focused on the Fed's easing cycle, perhaps forgetting we are still feeling the effects of Powell’s massive tightening cycle. We are just 10 quarters after the end of tightening, a typical timeframe for the start of a recession.
  4. The Fed's favorite inflation gauge (PCE) rose 0.1% in August vs. 0.2%, as expected. Trailing 12 months rose 2.2% with core inflation (excluding food and energy) +2.7%.
  5. While earnings estimates for 2025 remain +15%, 3Q24 estimates continue to fall and are now +3.7%. down from +7.3% on July 1.
  6. The path of least resistance for stocks has been higher on the new Fed easing cycle and soft-landing narrative. However, valuation is being noted as increasingly demanding.
  7. Chinese stocks rose 4% last Monday, thanks to a collection of easing measures by their central bank (lowered reserve requirements, cut interest rates, etc.) designed to boost demand. Meanwhile. Europe shows mounting signs of weakness (especially Germany).
  8. The U.S. continues to dominate global equity markets, now representing nearly 65% of global equity market capitalization (MSCI), an all-time high.
  9. The number of S&P 500 stocks hitting a new high this quarter (339) is the highest in 22 years, indicating a market that has broadened beyond mega-cap growth stocks.

Source: Bob Doll, Crossmark Investment CEO

 

Market and Index Changes for the Week Ending 9/27/2024

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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Data Sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market Data: Based on reported data in WSJ Market Data Center (indexes); U.S. Treasury (Treasury Yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness.

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The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighed index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

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