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Market Recap – April 22, 2024

Keel Point

April 22, 2024

Last week’s further pull-back in stock and bond prices is reflecting heightened angst about a possibly expanding conflict between Israel and Iran with resulting higher oil prices and inflation pressures.  Strong economic, employment and earnings growth, along with a slowdown in disinflation, have raised longer-term interest rates and driven both All Country World Index and S&P 500 stock prices down 3.39% and 3.73%, respectively, last week. 

  • The recent upturn in activity and employment growth and the resilience of core inflation suggest that the Fed won’t start cutting interest rates until September, or possibly later this year. This is the current, principal catalyst for the pull-back in financial markets.
  • Although now declining more slowly than expected, March core PCE inflation is on track to annualize at 2.5% for the past six months and fall back to 2.66% for the past 12 months. As it moves closer to the Fed’s target of 2%, and the economy continues to slow, the Fed will begin to cut rates in line with its previous projections.
  • The Israel/Iran attack and counter-attacks have increased the perceived risk to Middle East oil supply, and thus global oil prices. On news of the Friday counter-attack Brent crude rose from $87 per barrel to $90 pb but then fell back to $88 pb, and is down five percent from its high 2-3 weeks ago, suggesting the risks are already priced in.  So, further spill-over into the global economy is not likely to be material.

The IMF-World Bank spring meetings were in DC last week and provided their updated view of global economic growth, indicating slower rates of growth around the world.

  • IMF research reports that China is likely to represent 21% of global growth over the coming 5 years – more than the seven major developed countries combined and almost double the US’s 12% — reflecting their perception of changes in China policies in favor of stronger economic growth.
  • There are good reasons to be cautious about investing in China, but China advocates point out that China looks to be the world’s single biggest source of growth with an “e-commerce market twice that of the U.S., growing at double digit rates, with a population nearly four times larger and an economy growing at nearly double the U.S. growth rate.” (Tri-Polar World)

Disclosure:  Securities offered through Keel Point Capital, LLC, Member FINRA and SIPC.  Brokerage and Investment Advisory Services are offered under the Keel Point brand. Investment Advisory Services offered by Keel Point, LLC, an affiliate of Keel Point Capital, LLC. While reasonable efforts have been made to provide data from sources considered to be reliable, no guarantee of accuracy is given. Keel Point does not give tax, accounting, regulatory, or legal advice to its clients.

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