1st Quarter Financial Markets Strong Indeed

 

Financial Markets Update

The powerful rally in stock prices that started last November, continues into 2024. It was really hard not to make some serious money during the first three months.

Stock prices rose all three months, with February’s +5% gain being the best and March adding another +3%. That was good enough for a +10.1% gain on the S&P 500 Index. In hindsight, that was the best quarterly tally since 2019’s first quarter (+11.1%).

Since stock prices average a positive +10% gain over long time-frames, that’s a lot of moolah in a short time. The steady march upward is shown by my 3-month chart here of the S&P 500 Index.

Apparently, investors like what the outlook holds for the economy, inflation and company profits. Three sectors outperformed the general market: Energy, Communication Services and Financial Services; up 12% to 14% each.

Interest rates edged up a bit during the quarter. The 10-year US Treasury Note interest rate gained about 1/3 of 1% in the quarter. This seems small, but it did result in about a 2% loss in your principle. A better idea for fixed income (a fancy word for debt investments / bonds, is to own the short-term Treasury Bills, maturing in 3 and 6 months. Those interest rates are above 5% this year. Year-end 2023 the three-month T-bill paid 5.18% for a year, so that’s 1.3% interest in 3 months. Bond interest rates and bond prices more in opposite directions, higher rates mean lower prices and vice-versa.

Seems that the stubborn inflation and tight money (interest rates) are not hampering the optimism on Wall Street. Much of the talk the economic gurus is focused on when the Fed will start to cut interest rates. That will be a huge decision and will indicate confidence that inflation is finally under control.

While year-over-year inflation is ahead +3.1%, there are deep areas for concern I say. Energy prices, gas and oil are up sharply this year; oil’s at its highest since last October near $85, and gas prices are stubbornly stuck at $3.50 or so at the pump.

The other areas under siege in a bad way are housing costs (shelter), up 5.7% over the past 12 months. Add to that insurance costs; homeowner’s, windstorm, automobile – all up, up and away folks. It’s like you need to win the PowerBall to afford a place to call home these days. It’s close to $400,000 for the average American Home, and 30-year mortgage rates are near 7% now.

          Five Year Chart of the Average 30 Year Fixed Mortgage Interest Rate, Source Fannie Mae

Back to investments. Our favored commodity – Gold, added $170 an ounce for the quarter, good enough for a +8% gain, as it continued to notch record high prices above $2,200.  As I write this, its knocking moved above $2,300 to $2,320 this Friday..

Silver prices have gained about 20% in a month to $27.00! Silver needs a $50/ounce price to take out its old all-time high in 2011. Does all this positive price action in the precious metals portend heated inflation reports ahead? FIND OUT. Watch the next inflation release slated for April 10^th; 8:30 AM EDT.

The markets mentioned above have increased a LOT in 6 months, so expect a pull-back at some point. Not IF but WHEN. That’s why I advocate a balanced approach; owning Stocks, shorter term Treasury Bills and Notes, Gold, and some CASH for peace of mind.

Thanks for reading. Pass my blog address on to others who may benefit.

Have a safe weekend!

~Barry