The first quarter of 2024 has investors of all stripes focused on the prospects for Federal Reserve rate cuts, with the interest rate futures market pricing in a more aggressive pattern of cuts than Fed officials are suggesting. This has led to the “good news is bad news” paradigm, with positive economic data being met with negative moves in both the equity and fixed income markets. As we go to press, futures are pricing a 60% probability for a 50bp cut by June.
Economic data, particularly around employment, remain robust. Inflation, while steady, is still above the Fed’s target rate of 2%, and US GDP for Q4 shows the economy growing at a 3.2% annual rate. The Atlanta Fed GDP Now Forecast suggests 3% annualized growth for the first quarter.
The Unemployment Rate in January held steady at 3.7%, although Nonfarm Payrolls surged by 353k (versus expectations for +185k). The JOLTS reading for December ticked back up over 9 million openings, and weekly Initial Jobless Claims have yet to break meaningfully higher. In sum, the U.S. employment picture remains strong, and is the backbone of the “no-landing” thesis.
Inflation could prove more nettlesome, however, as it may prevent the Fed from cutting short-term rates in 2024, which would likely prove unsettling to equity markets. The Fed’s preferred inflation measure, the Personal Consumption Expenditure (PCE) Deflator, rose +0.3% in January, and is up +2.4% YoY. The Core PCE, which strips out volatile food and energy prices, rose +0.4% MoM, and is up +2.8% YoY. These numbers remain above the Fed’s target of 2% inflation, and may serve to delay interest rate cuts.
The outlook for the US economy remains strong, despite increasing geopolitical unrest and election-year angst. Corporate earnings rose YoY in Q4, the demand for labor is high, the housing market is strong, and thus far, higher interest rates haven’t triggered widespread distress. As mentioned up top, a lot rests on the Fed this year, with cuts to Fed Funds providing a risk tail-wind, but a more hawkish Fed potentially disrupting this Goldilocks situation we find ourselves in.
To read further about domestic and international equity, fixed-income, and alternative investments, please open the full paper below:
Nottingham Advisors offers both institutional and individual clients experience, sophistication, and professionalism when helping them achieve their goals. With over 40 years of serving Western New York and clients in more than 30 states, Nottingham tailors each solution to fit the specific needs of each client.
For more information about Nottingham’s offerings, visit www.nottinghamadvisors.com or call 716-633-3800.
Nottingham Advisors, Inc. (“Nottingham”) is an SEC registered investment adviser located in Amherst, New York. Registration does not imply a certain level of skill or training. Nottingham and its representatives are in compliance with the current registration and notice filing requirements imposed upon SEC registered investment advisers by those states in which Nottingham maintains clients. Nottingham may only transact business in those states in which it is registered, notice filed, or qualifies for an exemption or exclusion from registration or notice filing requirements. For information pertaining to the registration status of Nottingham, please contact Nottingham or refer to the Investment Advisor Public Disclosure Website (www.adviserinfo.sec.gov). Any subsequent, direct communication by Nottingham with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.
This newsletter is limited to the dissemination of general information pertaining to Nottingham’s investment advisory services. As such nothing herein should be construed as the provision of personalized investment advice. The information contained herein is based upon certain assumptions, theories and principles that do not completely or accurately reflect your specific circumstances. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security. Adhering to the assumptions, theories and principles serving the basis for the information contained herein should not be interpreted to provide a guarantee of future performance or a guarantee of achieving overall financial objectives. As investment returns, inflation, taxes and other economic conditions vary, your actual results may vary significantly. Furthermore, this newsletter contains certain forward-looking statements that indicate future possibilities. Due to known and unknown risks, other uncertainties and factors, actual results may differ materially from the expectations portrayed in such forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of their dates. As such, there is no guarantee that the views and opinions expressed in this article will come to pass. This newsletter should not be construed to limit or otherwise restrict Nottingham’s investment decisions.
This newsletter contains information derived from third party sources. Although we believe these third party sources to be reliable, we make no representations as to the accuracy or completeness of any information prepared by any unaffiliated third party incorporated herein, and take no responsibility therefore. Some portions of this newsletter include the use of charts or graphs. These are intended as visual aids only, and in no way should any client or prospective client interpret these visual aids as a method by which investment decisions should be made. We have provided performance results of certain market indices for illustrative purposes only as it is not possible to directly invest in an index. Indices are unmanaged, hypothetical vehicles that serve as market indicators and do not account for the deduction of management fees or transaction costs generally associated with investable products, which otherwise have the effect of reducing the performance of an actual investment portfolio. It should not be assumed that your account performance or the volatility of any securities held in your account will correspond directly to any benchmark index. A description of each index is available from us upon request.
Investing in the stock market involves gains and losses and may not be suitable for all investors. Past performance is no guarantee of future results.
For additional information about Nottingham, including fees and services, send for our Disclosure Brochure, Part 2A or Wrap Brochure, Part 2A Appendix 1 of our Form ADV using the contact information herein.
