S&P 500 Breaks Record: Most Successful Quarter in Five Years – Forecast – March 29, 2024

Amid the latest economic data, the S&P 500 ended the week on a positive note, posting its best quarterly performance in five years. Investors are optimistic about the future and awaiting new information on inflation.

Breakout of major indices

In addition to the S&P 500, the other two major U.S. indices also posted significant gains this quarter. The S&P 500 index rose 10.16%, boosted by increased interest in artificial intelligence stocks and speculation that the Federal Reserve will cut interest rates this year.

Dow Jones on the verge of historic achievement

The Dow Jones index is approaching the important milestone of 40,000 points, less than 1% off this target.

Economic development and labor market sustainability

The U.S. economy grew faster than expected in the fourth quarter, according to the latest data, driven by strong consumer spending. Additionally, the decline in new unemployment claims highlights the stability of the labor market.

Experts are optimistic

“The economy and consumers are doing well as they continue to spend. Unemployment remains low and there are areas where the economy is thriving… There are money that wants to be spent in a variety of ways,” says portfolio manager George Young. At Villers & Company

Nasdaq Reaches New Peaks

The technology-focused Nasdaq Composite Index also hit its highest level for the first time since November 2021, opening up new opportunities for investors.

Belief in an economic ‘soft landing’

A key factor in this year’s success has been investors’ confidence in the economy’s potential for a “soft landing” that lowers inflation without leading to a major recession.

Looking to the future: soft landings come first

A BofA Global Research survey conducted in March found that more than two-thirds of asset managers see a soft landing as the most likely scenario for the economy over the next 12 months, while just 11% expect a hard landing.

Fed maintains optimism

The March Federal Reserve meeting gave investors added confidence as the economic outlook improved and confirmed expectations of three interest rate cuts this year.

Overcoming rising bond yields

The stock has successfully weathered rising Treasury yields that previously weighed on the stock heading into 2023. The 10-year Treasury yield rose to 4.2% from 3.86% at the end of last year.

Pushing the boundaries of optimism

Strategists at the BlackRock Investment Institute say risk optimism could extend beyond the technology sector thanks to the integration of AI across industries, support from the Federal Reserve and slowing inflation. This is pushing more investment into U.S. stocks.

Rising stock prices reflect confidence

The S&P 500’s forward price-to-earnings ratio reached 21, the highest in two years, reflecting growing investor optimism about the stock market, according to LSEG Datastream.

Wind of change in the stock market

The stock market is still influenced by large companies, which will dictate trends in 2023. But this year has brought diversity to the growth dynamics, especially among the tech giants known as the “Magnificent Seven.”

artificial intelligence star

Nvidia stands out with impressive growth of over 80% thanks to its role as a leader in AI chips. Metaplatform is also showing notable success, with its value increasing by 37% and paying dividends for the first time in February.

Testing for tech giants

At the same time, not all major players are so lucky. Apple suffered an 11% loss due to pressure from China and regulators. Tesla is also showing a 29% decline due to concerns about demand for electric vehicles.

redistribution of influence

According to S&P Dow Jones Indices, the Magnificent Seven are responsible for 40% of the S&P 500’s year-to-date gain, a significant decline from last year when they contributed more than 60%. This means that the rally is expanding to other stocks and offsetting the current decline.

Watching Inflation Ahead of the Holidays

Against the backdrop of the upcoming Good Friday celebrations and the US stock market shutdown, analysts are eagerly awaiting the release of the PCE index. This index, the Federal Reserve’s preferred measure of inflation, will provide insight into the timing and extent of future interest rate cuts.

Minor changes compared to expectations

The Dow Jones Industrial Average rose slightly, up 0.12%, and the S&P 500 index also rose slightly, 0.11%. On the other hand, the Nasdaq Composite Index fell slightly by 0.12%, reflecting the market’s mixed reaction to the current economic outlook.

Weekly and monthly performance

Over the past week, the Dow Jones index is up 0.84%, the S&P 500 is up 0.39%, and the Nasdaq is up 0.3%. The increase in March was notable. The Dow Jones rose 2.08%, the S&P 500 rose 3.1%, and the Nasdaq rose 1.79%. All three indices showed significant gains this quarter, with the Dow up 5.62%, the S&P 500 up 10.16%, and the Nasdaq up 9.11%.

Fed comments confirm caution

Federal Reserve Chairman Christopher Waller said the Fed should show restraint in cutting short-term interest rates despite disappointing inflation data. However, he did not rule out a rate cut later this year, emphasizing the country’s readiness to take further regulatory action in response to economic conditions.

Fed Interest Rate Forecast

Based on data from CME’s FedWatch Tool, market analysts give the Fed a 64% chance of cutting interest rates by 25 basis points by June.

Achievements and failures by sector

Among major sectors, telecommunications, energy and technology were the best performers this quarter, while the real estate sector suffered losses. The distribution of these indicators reflects the changing priorities and interests of investors in the market.

Expanding investment horizons

According to Anthony Saglimbene, chief market strategist at Ameriprise, the observed trends suggest that investors are beginning to explore opportunities outside the dominance of the tech giants as they anticipate interest rate cuts later this year.

Focus on winners in the AI ​​era

Investors are also cautiously optimistic about which companies will benefit most from the increased use of artificial intelligence, and are adapting their investment strategies to future technology trends.

AI boom is attracting attention

Nvidia continues to lead the AI ​​push, but interest in the technology has also spread to other chipmakers such as Super Micro Computer and Arm Holdings. Another player in the space, Astera Labs, impressed the market by driving its stock price to double its initial public offering price in just one week.

Focused on healthcare

Shares in Walgreens Boots soared after its quarterly earnings report, where the company said the value of its investment in medical clinic operator VillageMD had declined by 3.19%.

Strategic moves in retail

Home Depot shares fell slightly after the company announced the $18.25 billion acquisition of building materials supplier SRS Distribution, the largest acquisition in the company’s history. The move highlights the retailer’s strategic efforts to expand its presence in the market.