Friday marked the end of a stellar first quarter for Wall Street, with the S&P surging ~10% and delivering its best Q1 since 2019. While the markets were closed for Good Friday, fresh data released on Friday reflected that the core personal consumption expenditures price index – the Federal Reserve’s favored inflation gauge – showed a deceleration to 0.3% in February. Later that day, Fed Chair Jerome Powell said at a San Francisco Fed conference that it was “good to see something coming in line with expectations.”

Also, released earlier this week was the Conference Board’s Leading Economic Index (LEI) which gained 0.1% month-over-month in February, ending a near two-year decline. Sustained declines in the Leading Economic Index have historically foreshadowed an imminent recession, but this time around it looks like a recession will have been avoided as the Federal Reserve attempts to engineer a soft landing. It’s important to note that the Conference Board LEI is heavily weighted toward the goods economy and less so the service economy.

Everyone now knows the Fed cut is coming, but when?

Future Wealth’s View

Wall Street may be impatient for interest rates to start falling, but the messaging from US Federal Reserve officials has been consistent. At the San Francisco Fed conference, Fed Chair Jerome Powell stated “The fact that the US economy is growing at such a solid pace, the fact that the labor market is still very, very strong, gives us the chance to just be a little more confident about inflation coming down before we take the important step of cutting rates.”

While the timing of the Fed cut – be it May or June is still up in the air, what is clear is that we will get a Fed cut soon. Which then shifts that focus of the stock market to corporate earnings and economic indicators rather than attempting to guess when the Fed cut will occur.

The bottom line is that no matter which indicators you pay attention to – economic headwinds are slowly being taken out of play. A strong first quarter for equities and despite the likelihood of bumps along the way, the outlook for stocks over the rest of the year still looks solid, whether looking at the macroeconomic backdrop or corporate earnings.

In our report on Jan 14, 2024, we had stated that “It is fully possible that we could see S&P at ~10,000 and the Nasdaq at ~40,000 in a decade from now.  Wouldn’t it be a shame if we parked our money in cash, CDs or bonds in the meantime?”. Link to the report is here – . Since that day in January when the S&P 500 and Nasdaq closed at 4,783 and 14,972 respectively, both have risen by ~9% to 5,254 for the S&P 500 and 16,379 for the Nasdaq as of March 29, 2024.

We will ask again – Wouldn’t it be a shame if we parked our money in cash, CDs or bonds?