2024 is off to the races with January coming to a close. Our monthly commentary is meant to touch upon the month’s trending news and give our perspective on “what’s happening?” and “why should we care?”. Let’s go over the few topics that have really driven headlines:
S&P 500: With still a day left to the month, S&P is up about 4%, continuing the strength from last year’s strong finish. The gain was driven mostly by strong economic data, continued lower unemployment, and lower inflation numbers (The Fed-preferred inflation gauge of PCE was lower but, CPI, the more popular number, was a bit higher). Fourth-quarter earnings are being released; results have been mixed but generally good. Some of the concerns we are hearing are focused on the upcoming election, forward looking earnings, conflict around the globe, and the high debt on both the public and private side.
Political Royal Rumble: We urge everyone not to let their political views play too much into their investing views. Trump? Haley? Biden? The market would say, “who cares?”. While the controlling powers help to write and change legislation, the makeup of the Legislative Branch bears more weight than who gets elected. Voting-politics is a money-losing strategy. Vote with your politics, invest with your intellect.
Global Conflict: Red Sea tensions have been a focus of the market for 24 months now, and while we will keep an eye on it, business has become pretty good at managing supply chains. This was tougher during Covid when supply-chain issues impacted inflation tremendously. Let’s remember, a major driver of that situation was the lack of personnel to unload the ships that did make it to the coast. While global tensions are high, the market seems to be shrugging it off. Political headlines can’t always be translated to our markets.
National Debt Crisis or Modern Monetary Theory?: Debt is an issue that is more complicated than meets the eye. We’ve said it before - for individuals and business owners, there is a difference between good debt and bad debt. We hope our elected representatives act responsibly, but this issue is likely to remain a concern for some time. The relative level of over 100% debt to GDP in the US is concerning, but keep in mind that Japan has over 200% debt to GDP. In other words, this may not be an immediate threat to the markets, but we would love to see the fiercely polar political fights simmer down and experience some sense of compromise for the American People.
Let’s see what February news brings. Wall Street Experience, Main Street Mindset!