11 March 2024

S&P 500 Looking to Gain Footing Near Record High

An editorial cartoon of a bull being hoisted by a helicopter just below the top of a tall mountain. The mountain is labeled 'S&P 500'. Image generated by Microsoft Copilot Designer.

The S&P 500 (Index: SPX) dipped during the first full trading week of March 2024. The index closed out the week at 5,123.69, a little less than 0.3% below where it ended the previous week.

Never-the-less, the index did manage to eke out a new record high close of 5,157.36 on Thursday, 7 March 2024. That high came in response to strong signals from Fed officials that they will indeed act to cut interest rates later in 2024. Investors currently expect the Fed to begin cutting interest rates in the U.S. in June 2024 to address a slowing economy. In that action, the Fed will be lagging behind the example of the European Central Bank, which is expected to begin cutting its interest rates to address the weak Eurozone economy as early as later this month.

The Fed's confirmation followed last week's hint from Fed officials that they plan to implement a new kind quantitative easing-style program to provide some relief from elevated interest rates, which had pushed the index up to its previous record high close on Friday, 1 March 2024.

In the latest update to the alternative futures chart, we find the trajectory of the S&P 500 is still running in the upper half of the latest redzone forecast range.

Alternative Futures - S&P 500 - 2024Q1 - Standard Model (m=+1.5 from 9 March 2023) - Snapshot on 8 Mar 2024

That forecast range assumes investors will remain closely focused on 2024-Q2 in setting the level of the index, which aligns with investor expectations of the Fed's interest rate cuts starting in June 2024.

Monday, 4 March 2024
Tuesday, 5 March 2024
Wednesday, 6 March 2024
Thursday, 7 March 2024
Friday, 8 March 2024

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), unchanged from last week. The Fed is expected to begin a series of quarter point rate cuts starting on that date, continuing into mid-2025 at six-to-twelve week intervals.

Meanwhile, the Atlanta Fed's GDPNow tool's latest estimate of real GDP growth for the first quarter of 2024 (2024-Q1) bumped up to +2.5% after last week's +2.1% projection.

Image Credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a bull being hoisted by a helicopter just below the top of a tall mountain. The mountain is labeled 'S&P 500'."