18 March 2024

S&P 500 Investors Riding a Disappointing Roller Coaster

A bull and a bear riding a roller coaster together, not smiling. Generated with Microsoft Copilot Designer.

As trading weeks go, the second week of March 2024 resembled a disappointing roller coaster ride for investors. The S&P 500 (Index: SPX) climbed to a new record high of 5,175.27 on Tuesday, 12 March 2024, but then went on to lose 1.1% of that new high value by the end of the week on the downhill part of its ride. The index closed at 5,117.09, a small 0.13% decline from the previous week's close.

What made the week disappointing for investors is a shift in expectations for how frequent interest rate cuts will be during 2024. Higher than expected inflation reports drove the change. While the CME Group's FedWatch Tool continues to project the Fed will hold the Federal Funds Rate steady in a target range of 5.25-5.50% until 12 June 2024 (2024-Q2) when it is expected to begin a series of quarter point rate cuts starting on that date, the FedWatch Tool's outlook changed to indicate investors are now anticipating these rate cuts will proceed at twelve week intervals, occurring less often than was projected just last week.

The downward leg of the S&P 500's roller coaster ride during the past week puts the index' trajectory closer to the middle of the redzone forecast range, as indicated in the latest update in the alternative futures chart.

Alternative Futures - S&P 500 - 2024Q1 - Standard Model (m=+1.5 from 9 March 2023) - Snapshot on 15 Mar 2024

Speaking about the future for interest rates, there were two other big economic news headlines involving them during the week that was. First, the European Central Bank (ECB) signaled it will almost certainly begin cutting Eurozone interest rates by the end of the this month. But in Japan, the Bank of Japan will take the opposite action as inflation ramps up in that country, marking the end of its long-running negative interest rate policy.

Those headlines, and more, are included in the following summary of the week's market-moving headlines:

Monday, 11 March 2024
Tuesday, 12 March 2024
Wednesday, 13 March 2024
Thursday, 14 March 2024
Friday, 15 March 2024

The Atlanta Fed's GDPNow tool's latest estimate of real GDP growth for the first quarter of 2024 (2024-Q1) fell to +2.3% after last week's +2.5% growth projection.

Image credit: Microsoft Copilot Designer. Prompt: "A bull and a bear riding a roller coaster together, not smiling."