We hope this message finds you well and that you are enjoying this tax season as much as we are!
As for the markets in February, they continue to show their own form of resiliency just like the overall economy has. The markets were able to look past the Federal Reserve’s mid-month commentary about not being in a hurry to reduce rates until they see further confirmation that inflation is cooling towards their target of 2%. With Federal Reserve holding rates higher for longer, this continues the balancing act of tightening financial conditions enough but not derailing the economy. With almost every person in the investment world, “Monday morning quarterbacking” the feds every move, the markets were able to hang in there for the month.
Since the current rally began at the end of October 2023, which has been led by mega-cap stocks fueled by Artificial Intelligence headlines, we finally began to see a broadening out of the markets. A broadening out of optimism is a key confirmation of any rally that there might be further upside potential. Earnings data came through relatively strong with 73% of the reporting companies exceeding expectations, which allowed for the markets to notch their fourth straight positive month. Some key points of this broadening market were that the Russell 2000 Small Cap index grew +5.6%, which outpaced the S&P 500 +5.2% for the first time in an extraordinarily long time. In addition, we saw Consumer Discretionary, and the Industrial sectors also outperform while the Technology sector, which has been a front runner, ended the month in the middle of the pack. The DOW Jones posted a positive return of +2.22% for the month and the Nasdaq, which continued to use Artificial Intelligence as its fuel, crossed the finish line at +6.12%.
In looking forward, all eyes of the investing world will be on any new inflation readings and any continued confirmations of the broadening out of the market rally. Key data points will be the release of the Consumer Price Index data which will be released on March 12th and the Federal Reserve’s wrap of their 2-day FOMC meeting on March 20th.
