Financial Market Update – Week of 3/25

With the Federal Reserve (Fed) meeting moving markets last week, here is a quick update.

As expected, the Fed kept interest rates unchanged last week at its March policy meeting. Federal Reserve Chair Jerome Powell’s commentary during the Q&A session indicated three rate cuts to come this year, which boosted the major stock indexes.

Overall, the S&P 500 rose by 2.29%, the Nasdaq 100 tacked on 2.98%, and the Dow Jones Industrial Average increased by 1.97% for the week.

Fed: Rates Unchanged, Inflation in Focus

As expected, the Fed left rates unchanged at last week’s policy meeting. Powell also struck a dovish tone for the future direction of Fed interest rate policy.

According to Powell, the Fed will continue to seek confirmation that inflation readings are moving toward the 2% Fed target, as the market has digested hotter-than-expected inflation readings in recent months.

“The other thing is, in the second half of the year, you had some pretty low readings, so it might be harder to make that 12-month window forward,” Powell said.

Nonetheless, we’re looking for data that confirm the low readings that we had last year. And give us a higher degree of confidence that what we saw was really inflation moving sustainably down to 2%.”

Three Rate Cuts in 2024, According to “Dot Plot”

The Fed’s dot plot, which consists of anonymous data from the 19 officials that comprise the Federal Open Market Committee (FOMC), indicated that the committee has penciled in three quarter-point cuts in 2024. You can see the Fed Dot Plot here.

There are only six Fed policy meetings left in 2024, so these projected rate cuts would have to start happening soon. Will upcoming inflation data cooperate and warrant such cuts? That’s the million-dollar question.

At the end of last week, probabilities favored the first Fed rate cut occurring at the June Fed meeting, with a 75.6% probability, according to the CME FedWatch Tool.

The Fed will next meet in May.

Home Sales Bounce

Existing home sales surged by 9.5% in February – or perhaps more accurately, one could say these sales “bounced” from anemic levels.

According to data from the National Association of Realtors, total sales of existing homes (including single-family houses, townhouses, condominiums, and co-ops) increased by 9.5% month-over-month in February to a seasonally adjusted annual rate of 4.38 million. However, sales declined by 3.3% compared to the same month last year, dropping from 4.53 million in February 2023.

It appears that buyers have finally come around to mortgage rates near present levels, with the average 30-year fixed mortgage near 7% last week. Present levels are much better than the near-8% pricing on the 30-year fixed mortgage back in October.

Crypto Overview

Major cryptocurrencies fell out of the spotlight last week as many pulled back from recent highs. Bitcoin pulled back around 4.92% on Coinbase for the week as of Saturday afternoon, trading near $65,000 per Bitcoin. This was around 11.56% off the recent all-time high near $73,500, which was set a couple of weeks ago.

Coinbase, the nation’s largest cryptocurrency exchange, has been in the news for some of its ancillary businesses in recent days.

Talks of an Ethereum ETF have also been a hot topic recently following the introduction of Bitcoin ETFs. Ethereum is the second-largest cryptocurrency market.

Wrapping the Week Up

Major U.S. stock indexes have kept at their recent bullish run, getting the catalyst they needed to break out of a two-week quiet period of consolidation.

Inflation definitely remains front and center as 23-year-high interest rates affect our everyday lives. Long-term investing helps in weathering this storm as wealth compounds over time, lessening the “pinch” that so many Americans are coping with right now.

This Friday’s Core Personal Consumption Expenditures (PCE) reading will be the long-awaited piece of data on inflation this week. It measures consumer goods and services pricing and is the Fed’s preferred metric on inflation — market watchers will be tuning in!

Thank you for reading!

The Trademark Capital® Team

This material is intended for informational purposes only and should not be construed as legal, accounting, tax, investment, or other professional advice. Trademark Capital’s investment strategies are built using quantitative, proprietary algorithms that are designed to identify and react to changing market conditions. However, investors should be aware that no investment strategy or risk management technique can guarantee returns or eliminate risk in any given market environment. As with all investments, Trademark Capital Management’s investment strategies are subject to risk and may lose money. The investment strategies presented are not appropriate for every investor and individual clients should review with their financial advisors the terms and conditions and risk involved with specific products or services. Due to our active risk management, our managed portfolios may underperform during bull markets. Past performance is no guarantee of future results.

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