Stock Market Insights: A Smooth Flight for Stocks in Q1

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Photo courtesy Richard Baker

“This is your captain speaking.” I had to fly to the East Coast last week for some meetings, and about a half-hour into our two-hour flight, the captain announced, ” We’re a quarter of the way to our destination and have reached our cruising altitude. I don’t expect any problems the rest of the way, but keep your seatbelts on in case we hit some unexpected turbulence.” That is also an appropriate announcement for the stock market this year so far.

We’ve finished the first quarter of 2024, and it was a great quarter for stocks. The S&P 500 index ended the quarter positively, benefiting from a resilient US economy, easing inflation, rising corporate profits, and expectations of beginning rate cuts from the Federal Reserve (Fed). The March positive gain made it the fifth straight positive month and made this quarter the best first quarter in the last five years.

There is a lot of discussion about how companies will use artificial intelligence (AI). It is still pretty early to see how it will affect corporate profits. It reminds me more of the mid-1990s when companies began utilizing the internet and less like the dot-com bubble in 1999–2000. It seems AI is more like a supplemental tool like the internet is and not the marketing gimmick of the dot-com age.

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Looking ahead to the next few months, I’m encouraged by the latest data showing the economy is growing steadily. Though inflation is still high, it is continuing to ease. Double-digit profits in the companies of the S&P 500 are looking more and more possible.

History suggests strength. Since 1950, the S&P 500 has risen 93% of the time in the 12 months following a five-month streak like we’ve had, with an average gain of over 12%, according to LPL. And down years are rare after strong first quarters. I wouldn’t be surprised by a pullback before the first Fed rate cut. This may be why we are seeing a choppy start to April, but stocks should respond positively to the rate cuts once they begin.

With solid fundamentals and history, I’m staying the course with the accounts I manage. As I have done for my clients, a rebalance in your portfolio might make sense. Overall, the current investment risks seem manageable, though I continue to watch inflation, Fed rates, and any war escalation that might affect the markets.

As I was on the tram in Dallas going to my next terminal, I was chatting with a pilot standing next to me, and I realized he had been my pilot. He immediately apologized for the unexpected turbulence. I laughed and said, “I’m fine with every flight I walk away from, and besides that, I took your advice. I kept my seatbelt on.” Marketwise, I don’t expect any major issues this year, but staying invested according to your risk tolerance is wise in case of unexpected turbulence.

Have a blessed week!

www.FerventWM.com

Dr. Richard Baker, AIF®, is the founder and executive wealth advisor at Fervent Wealth Management.

Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.

Opinions voiced above are for general information only & not intended as specific advice or recommendations for any person. All performance cited is historical & is no guarantee of future results. All indices are unmanaged and may not be invested directly. 

The economic forecast outlined in this material may not develop as predicted & there can be no guarantee that strategies promoted will be successful.

Fervent Wealth Management is a financial management and services entity in Springfield, Missouri.

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