Guidance Wealth will be closed Friday, March 29th to observe the Good Friday holiday
 
 The Markets
 
The central banks have spoken.
 
No one expected the United States Federal Reserve to announce a rate change last week – and it didn’t. But Fed Chair Jerome Powell’s comments and the actions of other central banks led to new records being set in stock markets around the world, reported Randall Forsyth of Barron’s.
 
“…the world’s central banks, led by the U.S. Federal Reserve…have all but green-lighted lower policy interest rates in coming months in the expectation that inflation will continue to make downward progress without triggering recessions. The Fed’s counterparts at the European Central Bank and the Bank of England similarly signaled lower rates ahead, while the Swiss National Bank made a surprise cut this past week…Meanwhile, major Latin American central banks, led by Brazil and Mexico, are well along in their rate cuts, having been much prompter in raising their rates to fight inflation starting in 2021, a year or more ahead of the Group of 10.”
 
In the United States, a lower federal funds rate could be good news for consumers and businesses. So, how low could rates go?
 
The Fed’s updated Summary of Economic Projections (SEP) shows that Fed officials expect the federal funds rate to move lower over the next three years, and beyond, based on what they know today. Here’s the SEP year-by-year forecast:

• 2024: 4.63-4.87 percent by year end. (Implying three quarter-point rate cuts over the year.)
• 2025: 3.88-4.12 percent by year end. (Implying three quarter-point rate cuts over the year.)
• 2026: 3.13-3.37 percent by year end. (Implying three quarter-point rate cuts over the year.)
• Longer term: 2.38-2.62 percent. (Implying additional rate cuts.)

 
When the fed funds rate moves lower, lending rates usually fall as well. So, consumers who buy a home or a car, apply for a home equity or business loan, or use a credit card over the next few years, could see lower interest rates.
 
U.S. stocks moved higher last week, and U.S. Treasury yields fell as the bond market rallied. 

​The Markets
 
Here’s the tea on stock markets and presidential elections.
 
Last week, a slew of headlines mentioned stock market bubbles and frothy valuations. The implication was that markets might be headed lower because they’ve risen so high. Last Wednesday, Lewis Krauskopf of Reuters reported:
 
“Some market participants believe the relentless U.S. stock rally is poised for a breather, even if it remains unclear whether equities are in a bubble or a strong bull run. The benchmark S&P 500…is up over 25% in the last five months, a phenomenon that has occurred just 10 times since the 1930s, according to BofA Global Research…the S&P has already made 16 record highs this year, the most in any first quarter since 1945, CFRA Research data showed.”
 
By the end of last week, we’d seen 17 record highs for the Standard & Poor’s (S&P) 500 Index.
 
If there is a market downturn this year, election sentiment is likely to be one of the reasons for the move. “Market moves during election years do tend to follow a similar pattern—declines leading up to early November, then a surge through year end once the winner is revealed.” While past performance does not guarantee future results, the S&P 500 has typically finished presidential election years higher, reported Nicholas Jasinski of Barron’s.
 
Despite the historic record, election rhetoric can make it difficult to remember that markets are efficient and adjust to changing risks. While election sentiment may sway stock markets over the shorter term, global economic growth, company fundamentals, central bank policies, and other factors, such as “the implications of the artificial intelligence [AI] boom on corporate earnings” are likely to matter more over the longer term, reported Jasinski.
 
No matter how emotional the election becomes, remember that your portfolio was built to meet your financial goals. If your longer-term goals and risk tolerance have not changed, making significant portfolio changes because of worries about the election outcome is not a sound idea.
 
That said, if you’re uneasy about the election and its potential effect on your savings and investments, please get in touch. We want to hear about your concerns and will help you identify potential solutions.
 
Major U.S. stock indices finished last week with mixed results. The bond market retreated amid inflation pressures, and U.S. Treasury yields moved higher over the week.

​The Markets
 
The week got off to a good start...
 
In testimony before House and Senate committees, Federal Reserve (Fed) Chair Jerome Powell noted that prices had been falling and unemployment rates remained quite low. As a result, he expected the Fed to begin lowering the federal funds rate in 2024.
 
“I think we’re in the right place,” he said. “We’re waiting to become more confident that inflation is moving sustainably at two percent. When we do get that confidence—and we’re not far from it—it’ll be appropriate to begin to dial back the level of restriction so that we don’t drive the economy into recession rather than normalizing policy as the economy gets back to normal.”
 
After Powell’s comments, the likelihood of a June rate cut rose, and so did U.S. stock indices. The bond market rallied, too, with yields across all maturities of U.S. Treasuries dropping lower through Thursday.
 
On Friday, a mixed bag of employment data arrived. It showed that:
 

• Hiring was stronger than expected in February. Employers added 275,000 new jobs over the month – 75,000 more than expected – although gains in December and January were revised lower.
• Wage growth was slower than expected, rising 4.3 percent year-over-year in February when economists had predicted a 4.5 percent annual increase, according to Meghan Leonhardt of Barron’s.
• The unemployment rate rose, increasing from 3.7 percent to 3.9 percent. (The unemployment rate is derived from a separate and smaller survey of households.)

 
The data suggested that the labor market was strong but cooling, and bolstered hopes that a soft landing might be ahead. While that was positive news, it was overshadowed by weakness in technology stocks. Sarah Hansen of Morningstar reported, “The stock market started 2024 with a blistering rally…But the relentless pace of gains has some watchers worried about soaring valuations on stock prices and frothy trading.”
 
On Friday, major U.S. stock indices finished the week lower. However, U.S. Treasury bonds rallied as yields declined over the week.

​The Markets

The bull market is alive and well.
 
“We know what investors are thinking,” reported Jacob Sonenshine of Barron’s. “The gains can keep coming, driven by an economy that is neither too hot nor too cold…The economy is growing, but only moderately, and the Federal Reserve can keep thinking about when it can start cutting interest rates…This dynamic is why nobody wants to miss out on the rally—and why they think it can keep going. A recent survey from Investors Intelligence shows the number of bulls outnumbered their bearish counterparts by the widest margin since late 2021.”
 
Recent market performance owes much to:
 

• Solid earnings growth and strong corporate profits. Last week, 97 percent of the companies in the Standard & Poor’s 500 Index had shared how well they performed in the fourth quarter of 2023. Overall, blended earnings for companies in the Index grew 4 percent year-over-year, exceeding expectations. Blended net profits were stable at 11.2 percent year-over-year, reported John Butters of FactSet.
• Slowing Inflation. Last week, one of the Fed’s favorite inflation gauges, the personal consumption expenditures (PCE) price index, showed inflation moved lower year-over-year. Prices rose 2.6 percent over the 12 months through December 2023 and 2.4 percent over the 12 months through January 2024. While inflation trended lower over the longer period, it increased month-to-month. In December 2023, prices rose 0.1 percent, and in January 2024, prices rose 0.3 percent.
• Enthusiasm for artificial intelligence (AI). Investors expect AI to boost productivity and corporate earnings. “Innovations in electricity and personal computers unleashed investment booms of as much as 2% of U.S. GDP as the technologies were adopted into the broader economy. Now, investment in artificial intelligence is ramping up quickly and could eventually have an even bigger impact on [economic growth],” reported Goldman Sachs.

 
Last week, the Standard & Poor’s 500 and Nasdaq Composite Indices closed at record highs, while the Dow Jones Industrial Average retreated. All three indices finished February with gains, reported Chuck Mikolajczak of Reuters. The U.S. Treasury market rallied with yields falling for all but the shortest maturity of Treasuries.