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Inflation & Rate Expectations Move Markets

Equities finished lower for the week for the first time since the start of the year.

However, what we may be witnessing is the beginning of a rotation among sectors of the market. Small caps and international equities moved higher while the Tech and Communication Services - two sectors that have lead the way for months - under-performed. We can see a breakout of the S&P 1500, which represents large, mid, and small caps, saw the majority of the index move higher as stocks advancing within the index out-paced decliners. In addition, sectors that have lagged - Healthcare, Financials, and Utilities - shined last week. Inflation numbers were the primary catalyst.


The month-over-month CPI & PPI numbers for January shocked the market last week, resulting in a 1.3% loss on Tuesday.

However, the year-over-year numbers are at or below the historical average. Markets need to adjust to a potential Fed rate cut not happening until the 2nd half of 2024. So far, consumers and corporations are managing their respective balance sheets well. Corporations are holding plenty of cash, especially when compared to the Dot.com era. Consumers are spending, but debt levels as a percent of disposable income are lower than just before the 2008 Financial Crisis. Expect more volatility as we enter the latter half of February.

 

Disclosures


The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.


Forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.


Any market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.


Past Performance does not guarantee future results.

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