Market Update – March 18th, 2024

Author:  Joe Maas, CIO SPG Advisors LLC

Monday, March 18th, 2024


Financial Markets

Last week provided notable data ahead of the FOMC meeting this week, as markets received two of February’s key inflationary readings, both the Consumer Price Index and the Producer Price Index. As of close on Friday, March 15th, the S&P 500 experienced a marginal decline of -0.13%, while the Nasdaq Composite saw slightly more of a downturn of -0.7% and the Dow Jones Industrial Average was flat for the week. In the bond market, the Barclays Aggregate Bond Index declined -1.19% as expectations for higher rates for longer drove yields up.

Market News

February CPI. February’s Consumer Price Index came in slightly higher than expected, with headline CPI coming in at 3.2% and core CPI, which excludes volatile food and energy costs, coming in at 3.8%. On a monthly basis, both headline and core CPI rose +0.4%. Despite the higher-than-expected inflation figures, markets were not alarmed, with the S&P 500 actually up more than 1% on Tuesday, March 12th following the news. Inflation has significantly moderated, although its proximity, at least in headline CPI, has stalled in making progress towards the Fed’s 2% goal since last summer.

Looking deeper into the February CPI report, energy and shelter made up 60% of the monthly rise in costs. Energy costs in February surged by +2.3% from January, while shelter costs increased +0.4%, both notable monthly jumps. On the other hand, food at home (groceries) was unchanged in the month of February, while food away from home (restaurants) rose slightly, up +0.1% in the month of February.

Also in February, transportation services saw a substantial uptick, rising by +1.4% from January. On the other hand, two categories saw monthly drops. Both new vehicles and medical care commodities fell -0.1% from January. Looking ahead, this latest CPI well above 3% print reinforces our belief that the Fed will not cut rates until late spring or summer, similar to what markets are pricing in.

Source: BLS

February Producer Price Index. Similar to the Consumer Price Index, February’s Producer Price Index came in slightly hotter than expected. Both headline and core PPI figures rose notably from a year ago, with headline PPI increasing by +1.6% and core PPI by +2.8%, both also representing an increase in annual inflation compared to January. On a monthly basis, headline PPI rose by +0.6% while core PPI increased by +0.4%, which was the hottest monthly increase in headline PPI since August of 2023.

A primary driver behind this uptick was energy prices, which surged by +4.4% from January. Additionally, food prices exerted significant inflationary pressure on producers in February, rising by +1.0% from January, a cost that may potentially be passed on to consumers in the coming months.

Another interesting dynamic in this month’s PPI was that inflation was much hotter in goods, compared to services, a shift from most of the inflationary data we’ve seen in the last year or two. Goods inflation, as a category, saw a notable increase of +1.2% MoM, while service inflation increased by a cooler +0.3% MoM. Overall, between February’s CPI and PPI reports, we view sticky inflation as a potential risk to the timeline of Federal Reserve rate cuts, with each hot inflation report increasing the probability that a rate cut gets pushed off well into summer.

Source: BLS

February Retail Sales. In February, retail sales figures fell short of expectations, indicating a weaker performance than anticipated. Sales rose by +0.6% MoM, notably lower than the expected increase of +1.0%. Furthermore, when compared to February 2023, retail sales showed a modest uptick of just +1.5%, which does not account for inflation.

Certain categories within retail did experience significant growth compared to a year ago. Nonstore retailers, which includes online shopping, saw a substantial increase of +6.4% from the previous year. Similarly, food services and drinking places witnessed notable growth, up +6.3% from February 2023. Overall, we see this month’s retail sales report as neutral. Although sales fell short of estimates, it is a cautionary data point we will continue to monitor, however it is not a bearish one at this time.

Consumer Sentiment. In March, the University of Michigan’s Consumer Sentiment Index experienced a slight decline of -0.5%, however the index was up +23.4% compared to the previous year. Within the survey, there were some improvements reported in consumers’ personal finances, but these were counterbalanced by modest downturns in expectations regarding business conditions.

Respondents participating in the survey pointed to the November elections as a significant factor influencing their projections of future economic circumstances. On top of election concerns, the survey’s reading on one-year inflation expectations remained unchanged at 3.0% in March, suggesting a consistent outlook on inflation among consumers, also in line with current inflationary data.


February’s Consumer Price Index slightly exceeded expectations, with headline CPI at 3.2% and core CPI at 3.8%. Behind the increase, energy and shelter costs primarily drove the rise in prices. Additionally, the Producer Price Index showed goods inflation surpassing service inflation, marking a shift from previous trends. February’s retail sales fell short of expectations, although did show a modest overall increase and strong growth in online shopping and food services. Consumer sentiment slightly declined in March, with respondents largely pointing to feelings of economic uncertainty with the upcoming presidential election.

In closing, we want to express our sincere gratitude to our valued readers and loyal customers for entrusting us with your financial well-being. Your continued support is the cornerstone of our success, and we are committed to serving you with the utmost dedication and professionalism. As we navigate the ever-changing financial landscape together, we encourage you to reach out to us if there have been any shifts in your risk tolerance or if you have experienced any material changes in your Investment Policy Statement objectives or constraints. Your financial goals are our top priority, and we are here to adapt and tailor our strategies to align with your evolving needs, whether they pertain to risk and return objectives or constraints such as time horizon, taxes, liquidity needs, legal issues, unique circumstances, or changes in your financial planning and retirement objectives. Your feedback and communication are essential in helping us ensure your financial success. Thank you once again for your trust and partnership with Synergy Asset Management. We look forward to continuing this journey together.

We appreciate your continued trust.

Thank you,

Joseph M. Maas,

The information contained herein is general in nature. It does not take into account your particular investment objectives, financial situation, or needs. It is provided for illustrative or informational purposes only, and should not be construed as advice. Our advisors can meet with you to discuss your retirement plan.

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