Ahh…springtime! The birds are chirping, the grass is growing, and the world is in bloom. As with most of nature, there comes a time when the young must strike out on their own. The baby birds must leave the nest, the cubs must leave the den and, most importantly, for everyone’s sanity, your children will eventually need to move out of your house. The birds and bears have it easy - unlike ducks and humans, they do not have bills. 😊
Helping a child to successfully establish independence is never easy, and more challenging now. Rent prices are through the roof. College loans, car loans, medical insurance, and the dreaded credit card bills (thanks to Uber and Amazon) can make the financial aspect of leaving home seem very scary at the least.
However, all is not lost! There are some things that you can do to help your child get ready and prepare for life outside of your house.
With the S&P 500 closing up positive on Friday 3/29/24, we can now claim a second consecutive quarter of double-digit market gains. This back-to-back performance has not occurred in 12 years. Impressive gains to say the least but that’s just a part of the story. Q1 2024 was the best first quarter experienced since 2019. And the S&P 500 has been up over 22% in the last 2 quarters (and over 27% since the bottom that we experienced in late October of last year).
2023, for the most part, was a technology-driven market. If you back out the sizable gains produced by relatively small cohort of growth stocks (the “Magnificent 7”), the overall market produced fairly mediocre returns. It wasn’t until the FED implied a change in policy intent and a pause on future interest rate hikes that the rest of the market (the other 493 companies of the S&P 500) started to claw back some ground. And that ground, so far, has been maintained.
This year we continue to witness outsized returns coming from companies that will benefit from the application of Artificial Intelligence (AI). Advancements in AI have pushed names like Microsoft, Meta, Amazon and Nvidia to new highs -- as all of these companies should continue to see business model improvements & efficiencies from this technology.
So far this year, we are seeing market participation broaden. Both energy and financials are up 12% year-to-date. The communication sector has been up roughly 15% this year and the progress being made is not all relegated to just large caps. The Russell 2000 (two thousand small companies) has recently hit it’s 52-week high.
With this backdrop, what are investors to expect going forward? Will the same market leadership continue to drive performance? And what happens if certain expectations that have been driving the markets to new levels do not occur? Expectations may need to be adjusted given where we are now.
"Large cap" refers to a classification of companies based on their market capitalization, which is the total value of all their outstanding shares. Large cap companies are typically those with the largest market capitalizations among publicly traded companies. While there is no universally agreed-upon cutoff, large cap companies are generally considered to have market capitalizations above a certain threshold, which can vary depending on the context and the source. However, they are generally regarded as companies with market capitalizations over $10 billion.
Large cap companies are often well-established, mature businesses with a significant market presence and are generally considered to be less volatile compared to small and mid-cap companies. Investors often view large cap stocks as more stable investments, offering relatively steady returns over time. Examples of large cap companies include multinational corporations like Apple Inc., Microsoft Corporation, and Exxon Mobil Corporation.
Personal Consumption Expenditures (PCE) refer to the total amount of money spent by households on goods and services within a specific time period, typically on a monthly or quarterly basis. PCE is a key component of Gross Domestic Product (GDP) calculation and is considered a comprehensive measure of consumer spending.
PCE includes expenditures on a wide range of goods and services, such as food, clothing, housing, transportation, healthcare, recreation, and education. It encompasses both durable goods (such as cars and appliances) and non-durable goods (such as food and clothing), as well as services (such as healthcare and entertainment).
The calculation of PCE takes into account changes in the prices of goods and services over time, providing a measure of both the quantity of goods and services consumed and the changes in their prices. This makes PCE a valuable indicator of consumer behavior, economic activity, and inflationary pressures in an economy.
PCE data is closely monitored by economists, policymakers, and businesses as it provides insights into consumer confidence, household spending patterns, and overall economic health. It is often used to assess the effectiveness of monetary and fiscal policies and to make forecasts about future economic trends.
