Spring In The Air

Spring In The Air

April 05, 2024

The first quarter of the year was outstanding for the S&P 500 with it being up about 10%, especially with the expectations of Fed rate cuts being neutralized a bit.  The bond markets can’t seem to catch a break though.  The aggregate bond index ended down about 1%.  Just when we think we’re getting away from any talk by the Fed about rate cuts, they come roaring back.  Even amongst the Fed board members, there is wide disagreement.  While the Fed Chair says that cuts are likely, another member thinks there could be none!

With others pulling the levers of our economy, how can we stay calm when the markets get volatile?  Just remember that if you were to zoom yourself out 20 years, these events are likely small blips.  Most people probably won’t even remember much of the news a few years from now.

I’ve been asked a ton of questions on the election coming up in November. I wrote about this a bit back in the mid-term cycle.  I’ll copy some of that here as it’s a good reminder every couple of years. 

The markets like certainty.  The only certainty that seems to sway the markets is that gridlock is good.  This means that if both parties are in some control of Congress, then no big corporate policy changes will pass which allows companies to operate status quo.  The checks and balances of government parties are well received by the markets.  This is where I can share with you some of the data that can come into play.  The image shows the following from LPL Research:

When Republicans have controlled both chambers in Washington, DC, on average the S&P 500 has gained 13.4% per year and GDP has grown 3%. When Democrats have controlled both the House of Representatives and the Senate, the economy did a little better, with GDP growth of 3.3%, while the S&P 500 was up 10.7% on average. When we’ve had a split Congress, however, the average S&P 500 gain climbed to 17.2%, while GDP growth averaged 2.8%, again suggesting markets may prefer split power come November.

Hopefully that can give you some insight throughout the summer months.  With warmer weather right around the corner, maybe…just maybe, the snow will melt away this week and we can all get outside!

Larry Mroczkowski

President

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All investing involves risks, including the loss of principal.