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Weekly Market Recap | 3/04/24

What happened last week

  • Stocks rose as mega-cap tech and the
    AI theme continued to propel equity
    markets to new all-time highs.
  • Retail speculation and flow into more
    speculative risk assets, such as
    profitless tech and crypto, may warrant
    some caution.
  • Inflation data came in as expected and
    hence did not catalyze direction in
    rates; we are monitoring catalysts for a
    break higher or lower in yields.

What we’re watching this week

  • Fed Chair Powell’s testimony on
    Wednesday and Thursday could serve
    as a rate direction catalyst.
  • Non-farm payrolls on Friday to provide
    an update on the labor market.
  • Outside the U.S., China’s National
    People’s Congress meeting could
    confirm or reject the recent rally in the
    countries’ equities prompted by recent
    policy support.

Horizon’s Investment Management Views

It was more of the same last week as the tech-heavy NASDAQ 100 led the global stock rally. The S&P 500 is now up 16 of the last 18 weeks, gaining over 25% in a winning streak last seen in 1971 (and only a handful of times since index data began in the 1920s). Positioning is getting extended and parts of the market, like profitless tech and crypto, are showing very frothy behavior. However, fighting such a strong trend in risk assets is hard, especially with the momentum of the AI trade; we are monitoring key catalysts around that theme, including Broadcom’s earnings this week and Nvidia’s AI conference on March 18, as well as the level of long-term yields, as important indicators.

On the data front, the Fed’s preferred inflation measure, PCE, came in about as expected last week. A pause in the disinflation trend and upside economic growth surprises have pushed back Fed cuts sharply to about three this year from over six to start the year. We continue to think that rates matter more for equity internals than the overall market, but we are watching for a new direction in yields after the 10-year Treasury yield has been stuck around the 4.2% level since the upside surprise to January CPI.

Investors are in for a busy week with updates from the Fed, the U.S. labor market, and economic policy in China. Chair Powell may drop hints on monetary policy in his annual testimony to Congress mid-week. The labor market dominates the economic calendar; Friday’s jobs report is especially important. The labor market remains a key pillar to our positive outlook. China’s annual National People’s Congress meeting is the major international event of the week. Top of mind for us is whether they can add to recent equity market policy support with a realistic growth target and additional fiscal support for Chinese consumers. China’s actions matter for sentiment around international markets in general, not just emerging markets.

PCE = Personal Consumption Expenditures. CPI = Consumer Price Index. The commentary in this report is not a complete analysis of every material fact in respect to any company, industry or security. The opinions expressed here are not investment recommendations, but rather opinions that reflect the judgment of Horizon as of the date of the report and are subject to change without notice. Forward looking statements cannot be guaranteed. We do not intend and will not endeavor to provide notice if and when our opinions or actions change. This document does not constitute an offer to sell or a solicitation of an offer to buy any security or product and may not be relied upon in connection with the purchase or sale of any security or device. Before investing, an investor should consider his or her investment goals and risk comfort levels and consult with his or her investment adviser and tax professional. Equities are represented by the S&P 500 Index which is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies. The Nasdaq-100 is a stock market index made up of equity securities issued by 100 of the largest non-financial companies listed on the Nasdaq stock exchange. References to indices, or other measures of relative market performance over a specified period of time are provided for informational purposes only. Reference to an index does not imply
that any account will achieve returns, volatility or other results similar to that index. The composition of an index may not reflect the manner in which a portfolio is constructed in relation to expected or achieved returns, portfolio guidelines, restrictions, sectors, correlations, concentrations, volatility or tracking error targets, all of which are subject to change. It is not possible to invest directly in an index. This commentary is based on public information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Horizon Investments and the Horizon H are registered trademarks of Horizon Investments, LLC.

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