Monthly Market Roundup cov. April 2024
In our monthly market roundup for April, Invesco experts give a rundown on a mixed month for global equity markets, plus an overview of bond markets.
Today, the S&P 500 Index hit a new high, surpassing its previous record set in January 2022.
A resilient economy, quickly fading inflation, and strong 2023 performance fueled the market’s new record.
It’s far more interesting to compare the price of an index to the fundamental characteristics of the companies in that index.
The S&P 500 Index hit a new record.1 We did it! And also … what do we do now? Here’s what stock market highs mean — and don’t mean — for long-term investors.
Admittedly, the prior peak in January 2022 wasn’t that long ago in terms of days, but a lot happened over that time period: US inflation climbed to 9%2, the Federal Reserve raised interest rates by over 500 basis points3, Russia invaded Ukraine, and a new Middle East conflict emerged. (Taylor Swift’s record-setting album Midnights hadn’t even been released yet.) Prominent naysayers warned of “economic hurricanes,” “five years of unemployment above 5%,” and “the worst earnings recession since 2008.” Not surprisingly, Americans’ confidence in the economy eroded.4
Fast forward two years. Thanks to a resilient economy, quickly fading inflation, and a 26% advance in 2023, we’re now celebrating the S&P 500 Index hitting a new record above 4797.5 Some investors might view this with trepidation. After all, aren’t we still waiting for the lagged effects of historic policy tightening to hit the economy? That’s true, but markets lead the economy, not vice versa. In my view, it’s likely that the 25.4% peak-to-trough decline in the S&P 500 Index in 2022 was accounting for the looming economic slowdown.6 A 25% decline is in line with the market’s performance ahead of past mild economic slowdowns/modest recessions. In those garden-variety economic downturns, markets historically bottomed around the time inflation had peaked and returned to prior highs within a year or two.7 Sound familiar?
More importantly, a new market high is not in itself any kind of danger sign — despite what some may fear. As the author Sir Arthur C. Clarke said, “Only small minds are impressed by large numbers.” Here are three points to help put those large numbers into perspective:
Monthly Market Roundup cov. April 2024
In our monthly market roundup for April, Invesco experts give a rundown on a mixed month for global equity markets, plus an overview of bond markets.
A cooler US jobs report gives hope for a Federal Reserve rate cut
Is the US economy softening or heading for a substantial slowdown? We discuss the latest jobs report and what copper prices are telling us about global growth.
Stagflation? Sticky inflation? Seven reasons for investors to be positive
Higher-than-expected inflation has prompted questions about stagflation and when the Federal Reserve will cut interest rates. I discuss seven reasons for investors to be positive.
1Source: Bloomberg, 1/19/24.
2Source: US Bureau of Labor Statistics, 11/30/23. As represented by the yearly percent change in the US Consumer Price Index.
3Source: US Federal Reserve, 12/31/23. As represented by the federal funds rate.
4Source: Gallup, 9/30/23. As represented by the Gallup Economic Confidence Index.
5Source: Bloomberg, 1/19/24.
6Source: Bloomberg, 12/31/23. As represented by the S&P 500 Index, which fell 25.4% from the peak on 1/3/22 to the trough on 10/13/22.
7Source: Bloomberg L.P., 6/30/23. Based on recession dates defined by the National Bureau of Economic Research: Aug. 1957 – Apr. 1958, Apr. 1960 – Feb. 1961, Dec. 1969 – Nov. 1970, Nov. 1973 – Mar. 1975, Jan. 1980 – Jul. 1980, Jul. 1981 – Nov. 1982, Jul. 1990 – Mar. 1991, Mar. 2001 – Nov. 2001, Dec. 2007 – Jun. 2009 and Feb. 2020 – Apr. 2020.
8Sources: Bloomberg, Invesco, 12/31/23. Top ten holdings as of 11/30/23 are Microsoft, Apple, Amazon, NVIDIA, Alphabet, Meta, Tesla, Berkshire Hathaway, UnitedHealth Group, and JP Morgan Chase.
9Source: Bloomberg, 1/19/24.
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