Stocks extended their record setting run on Friday, with the S&P 500 and Dow Jones average setting fresh record closing highs, as a blockbuster jobs report bolstered the outlook for corporate profits. The sizzling US labor market is good news for American workers and President Joe Biden, whose message on the nation’s booming economy may be starting to get through. Consumer sentiment also jumped for the month with people upbeat about their household finances, even if some are cautious about their ongoing job prospects—especially given all the high profile mass firings by tech companies and others of late. For the week, the S&P and Dow each added 1.4% and the Nasdaq Composite rose 1.1%, all higher for the fourth straight week.
The Fed is still pursuing its soft landing in the fight against inflation while the US has added thousands of jobs and broken with the pre-pandemic trend of weak wage growth. While the Fed has indicated it will start cutting interest rates this year if inflation continues to retreat, the strength of the job market could keep the timing in flux. Fed officials are hoping employment growth will remain strong enough to keep the economic expansion intact but says it would like to see more moderate pay gains as it awaits confirmation that inflation will keep slowing to its 2% target.
Future Wealth’s View
When markets are reaching new highs, every investor feels good about their portfolio and considers themselves to be good stock pickers. Most investors tend to distance themselves from the disastrous performance of their portfolio in 2022 and ignore the warning signs in their portfolios in 2024. The two companies that have been darlings on Wall Street – Apple and Tesla are selling off in the midst of new highs in the market. If you are looking for red flags – you have two of them right there.
Last week, we had stated in our report that “Taking profits never hurt anyone.” With mixed earnings results from companies and the prospect of an interest rate cut pushed out to mid-year, we would encourage investors to look at fundamentals of the companies in their portfolios and make a wise decision to sell or hold, given the run up in the stock market. The market looks to be poised to go higher but not all stocks are created equal.
As my neighbor said while we were discussing the recent rise in the stock market – “The only thing that has kept going higher, without a pullback, is my happiness since I stopped looking at my portfolio everyday”.