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Market Momentum – Zooming Ahead or Bracing for Trouble?

Market Momentum – Zooming Ahead or Bracing for Trouble?

April 10, 2024

From the desk of Vance Howard:

4-9-24-SPY

The market continues to trade in a strong upward channel, but we think it is currently overbought and a pullback will most likely occur. This should be considered a buying opportunity, as we see the market moving higher throughout the year. Energy has been moving higher with the instability in the Middle East and has the potential to keep inflation from dropping, as all hope it will.

In Q4, U.S. economic growth exceeded previous estimates, with real GDP rising to a 3.4% annualized rate. Upward revisions to consumer spending, business investment, and government spending were partly offset by decreases in inventories and net exports. Real final sales to domestic purchasers, excluding inventories and net exports, increased to a 3.5% annualized rate, indicating robust domestic demand. This trend suggests continued growth in the near term, supported by a drop in our recession probability model. Fiscal stimulus exceeding $5 trillion during the pandemic, alongside ongoing government support, has kept the economy expanding, driving inflation. Despite the Fed raising rates in March 2022 to counter inflation, the economy grew beyond potential in the second half of 2023. With inflation persisting above 2%, there’s concern that any Fed easing could risk overheating the economy, especially as fiscal policies like the Infrastructure Investment and Jobs Act continue to support growth. While supportive for equity markets historically, such policies may exacerbate inflation if they push growth beyond capacity.

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent in February on a seasonally adjusted basis, after rising 0.3 percent in January, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.2 percent before seasonal adjustment.

The index for shelter rose in February, as did the index for gasoline. Combined, these two indexes contributed over sixty percent of the monthly increase in the index for all items. The energy index rose 2.3 percent over the month, as all of its component indexes increased. The food index was unchanged in February, as was the food at home index. The food away from home index rose 0.1 percent over the month.

The index for all items less food and energy rose 0.4 percent in February, as it did in January. Indexes which increased in February include shelter, airline fares, motor vehicle insurance, apparel, and recreation. The index for personal care and the index for household furnishings and operations were among those that decreased over the month.

The all items index rose 3.2 percent for the 12 months ending February, a larger increase than the 3.1-percent increase for the 12 months ending January. The all items less food and energy index rose 3.8 percent over the last 12 months. The energy index decreased 1.9 percent for the 12 months ending February, while the food index increased 2.2 percent over the last year.

Vance Howard

This communication is issued by Howard Capital Management, Inc. It is for informational purposes and is not an official confirmation of terms. It is not guaranteed as to accuracy, nor is it a complete statement of the financial products or markets referred to. Opinions expressed are subject to change without notice. Howard Capital Management, Inc. may maintain long or short positions in the financial instruments referred to and may transact in them as principal or agent. Unless stated specifically otherwise, this is not a recommendation, offer or solicitation to buy or sell and any prices or quotations contained herein are indicative only. To the extent permitted by law, Howard Capital Management, Inc. does not accept any liability arising from the use of this communication. Howard Capital Management is an SEC-registered investment advisor which only does business where it is properly registered or is otherwise exempt from registration. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the advisor has attained a particular level of skill or ability. Past performance is no guarantee of future results.HCM-022824-WW06 (02/2024)

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