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Monthly Market Newsletter, April 2024

Monthly Market Newsletter, April 2024

May 15, 2024

May brings plenty of reasons to celebrate with loved ones thanks to many holidays – Cinco de Mayo, Mother's Day, Memorial Day, and, of course, National Pet Month! However, there seems to be less to celebrate in the world of finances. April was the worst month of the year so far for the stock markets, and inflation continues to remain higher than the Federal Reserve's 2% target rate, making cuts to interest rates less likely to occur at all this year. 

The Consumer Confidence Index, a key indicator of economic health, experienced a significant decline in April, dropping to 97 from 103.1 in March. This was well below economists' expectations of 104 and marks the lowest point since mid-2022. The decline was driven by concerns over future business conditions, labor market conditions, and income expectations. Consumers' worries about inflation, higher cost of living, and the possibility the Fed won’t cut rates before summer's end were also factors. The upcoming presidential election and global conflicts are further dampening consumer confidence. 

Small businesses are at the heart of our community, and you can recognize the ones that impact you with National Small Business Day on May 10th. Why are small businesses so important? They create jobs in our community, contribute directly to the local economy, and add unique character to neighborhoods. There are more than 30 million small businesses in the United States, and they account for nearly 60% of all jobs. So, how can you make the most of celebrating small businesses on this day (and every day)? First, shop at small businesses. Then, take time to recognize them with positive reviews online. And last, don’t forget to tell your friends and family about the small businesses you enjoy supporting and why.

May is Disability Insurance Awareness Month - a special reminder that planning for potential risks like a disability can provide a financial safety net even if the unexpected happens… and it happens more frequently than you might think. Disability insurance offers financial protection by replacing a portion of your income if you are unable to work due to an illness or injury. This coverage ensures that you can continue to meet your financial obligations, maintain your standard of living, and focus on recovery without the added stress of financial strain. If you’re unsure about the best disability insurance coverage for your needs, have any other questions you’d like to discuss, or just want to chat, don’t hesitate to reach out to our office. We’re here to help.

Stocks

Equities dropped in April, with all three major U.S. equity indices down by at least 4% for the month. Higher-than-expected inflation data coupled with lower-than-expected economic growth heightened investors’ concerns, and as such, the markets pulled back. Despite the pullback, earnings have been largely positive for U.S. equities. With just over half of S&P 500 companies reporting in, the current growth rate for earnings is 5.23%, and a similar sales growth at 4.29%. As the year continues, strong economic growth may delay the Fed from cutting interest rates but enable companies to post strong top and bottom-line figures.

Sector Performance

In a staunch reversal from March, only one sector, the defense-oriented Utilities sector, ended the month positive. Utilities have been performing well in recent months, with several companies announcing they’re raising dividends and focusing on reducing debt. The weakest sector in April was Real Estate, which continues to be impacted by high mortgage rates, making homeownership unaffordable for many looking for new homes. Technology, one of the top performers in 2023, continues to rank toward the bottom, falling over 5% for the month as the gap in market sector performance widens.

Bonds

Fixed income had its worst month of the year as rates climbed to highs not seen since last November. Each fixed-income index finished the month down over 2%, with longer-duration assets declining the most. Interest rates on both the 2-year and 10-year Treasury continued to climb, with the yield on the 2-year crossing 5% on multiple occasions. Rates rose 42 bps and 48 bps for the 2-year and 10-year, respectively. The bond market continues to be impacted due to inflation rates remaining stickier than experts anticipated and the Fed’s decision to delay rate cuts.

Economic Update

The Consumer Price Index (CPI) accelerated for the second month and posted the fastest year-over-year growth rate since last September. Core prices (excluding food and energy) continued to climb, with rising energy prices driving the increase. The first quarter reading of Gross Domestic Product (GDP) came in weaker than expected at an annualized rate of 1.6%, indicating a potential softening in the economy. On a more positive note, the GDP report showed consumer spending remained strong, increasing 2.5% despite consumer sentiment falling in the most recent edition of the University of Michigan Consumer Sentiment Report.

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Stressed? A High-Five Can Help Relieve It

Feeling stressed? A simple physical touch, like a pat on the back or a hug, can relieve it, according to a groundbreaking study from the University of Basel in Switzerland. This study, which delved into one of the most stressful parts of basketball – the free throw shot – found that simple physical touches statistically increased free throw points in collegiate basketball.

Researchers observed 60 NCAA women’s basketball games that included 835 incidents of free throws. They found that when the shooter received a touch – either a pat or a hand squeeze, their chances of making the shot improved. This improvement was especially noticeable if the player missed the first shot, thus likely feeling increased pressure to make the second shot. A quick touch of support by teammates before the second shot at the basket seems to alleviate the free thrower’s stress when it’s most high. Since free throw points can greatly impact the outcome of a basketball game, anything that can help improve those shots is worth exploring.

Human touch has long been known as a form of comfort, but now has been shown to help alleviate stress even for those who have the most experience performing in high-stress situations. Though basketball is a team sport, free throws are an opportunity where the game’s fate is placed on one person. This study is an excellent look at how athletes deal with stress and how those at the top of their sport can still benefit from simple encouragement and support.

Interested in learning more? Check out the complete study here.

THOUGHT FOR THE MONTH

Index Definitions

Dow Jones Industrial Average: The Dow Jones Industrial Average® (The Dow®), is a price-weighted measure of 30 U.S. blue-chip companies. The index covers all industries except transportation and utilities.

Dow Jones U.S. Real Estate Total Return Index: The index is designed to track the performance of real estate investment trusts (REIT) and other companies that invest directly or indirectly in real estate through development, management, or ownership, including property agencies.

NASDAQ Composite: The NASDAQ Composite is a market-cap weighted index of all issues listed on the Nasdaq stock exchange. It is heavily weighted towards the technology sector. 

S&P 500 Bond Index: The S&P 500® Bond Index is designed to be a corporate-bond counterpart to the S&P 500, which is widely regarded as the best single gauge of large-cap U.S. equities. Market value-weighted, the index seeks to measure the performance of U.S. corporate debt issued by constituents in the iconic S&P 500.

S&P 500 Consumer Discretionary: The S&P 500® Consumer Discretionary comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer discretionary sector.

S&P 500 Consumer Staples: The S&P 500® Consumer Staples comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer staples sector.

S&P 500 Energy: The S&P 500® Energy comprises those companies included in the S&P 500 that are classified as members of the GICS® energy sector.

S&P 500 Financials: The S&P 500® Financials comprises those companies included in the S&P 500 that are classified as members of the GICS® financials sector.

S&P 500 Index: The S&P 500® index is a market-cap weighted index of the largest 500 companies headquartered in the United States. The index covers approximately 80% of available market capitalization.

S&P 500 Utilities: The S&P 500® Utilities comprises those companies included in the S&P 500 that are classified as members of the GICS® utilities sector.

S&P U.S. Aggregate Bond Index: The S&P U.S. Aggregate Bond Index is designed to measure the performance of publicly issued U.S. dollar denominated investment-grade debt. The index is part of the S&P AggregateTM Bond Index family and includes U.S. treasuries, quasi-governments, corporates, taxable municipal bonds, foreign agency, supranational, federal agency, and non-U.S. debentures, covered bonds, and residential mortgage pass-throughs.

S&P U.S. Treasury Bond Index: The S&P U.S. Treasury Bond Index is a broad, comprehensive, market-value weighted index that seeks to measure the performance of the U.S. Treasury Bond market.

Disclosures 

PLEASE NOTE: When you link to any of the websites displayed within this email, you are leaving this email and assume total responsibility and risk for your use of the website you are linking to. We make no representation as to the completeness or accuracy of any information provided at these websites.

A portion of this material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.

Index performance does not reflect the deduction of any fees and expenses, and if deducted, performance would be reduced. Indexes are unmanaged and investors are not able to invest directly into any index. Past performance cannot guarantee future results. 

Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect again loss. In general, the bond market is volatile; bond prices rise when interest rates fall and vice versa. This effect is usually pronounced for longer-term securities. Any fixed-income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. Vehicles that invest in lower-rated debt securities (commonly referred to as junk bonds or high-yield bonds) involve additional risks because of the lower credit quality of the securities in the portfolio. International investing involves special risks not present with U.S. investments due to factors such as increased volatility, currency fluctuation, and differences in auditing and other financial standards. These risks can be accentuated in emerging markets.

The statements provided herein are based solely on the opinions of the Osaic Research Team and are being provided for general information purposes only. Neither the information nor any opinion expressed constitutes an offer or a solicitation to buy or sell any securities or other financial instruments. Any opinions provided herein should not be relied upon for investment decisions and may differ from those of other departments or divisions of Osaic or its affiliates.

Certain information may be based on information received from sources the Osaic Research Team considers reliable; however, the accuracy and completeness of such information cannot be guaranteed. Certain statements contained herein may constitute “projections,” “forecasts” and other “forward-looking statements” which do not reflect actual results and are based primarily upon applying retroactively a hypothetical set of assumptions to certain historical financial information. Any opinions, projections, forecasts and forward-looking statements presented herein reflect the judgment of the Osaic Research Team only as of the date of this document and are subject to change without notice. Osaic has no obligation to provide updates or changes to these opinions, projections, forecasts and forward-looking statements. Osaic is not soliciting or recommending any action based on any information in this document.