The FCMS Investment Committee is pleased to share the latest insights on the current financial market and economic developments.

Market Perspectives

Here are the top things from our FCMS Investment Committee on current financial markets and economic developments:

1. 1. Nvidia Drives Fresh All-Time Highs for S&P500 and Global Stocks

      The S&P 500 and global stocks notched fresh all-time highs last week, largely driven by the earnings release of one single stock – Nvidia. The AI-darling’s results beat consensus estimates and reassured investors that the themes that have captivated market participants for over a year still have room to run. Those looking for a broadening out of the market were disappointed; small caps were down on the week and remained over 10% from their all-time highs. International equities, more than 10% from their alltime highs, fared better and generally matched domestic large caps last week as optimism over China’s stabilization policy improved the otherwise dour sentiment.

   2. Short-Term Yields Driven Higher Thanks to Fed Member Pushback

      Meanwhile, in the bond market, ongoing pushback from Fed members, especially Governor Waller’s lack of concern around delaying an interest rate cut for a few more months, drove short-term yields higher. The just over three cuts now priced into 2024 should prove to be a floor for the time being, likely increasing the sensitivity of long-term rates to economic data. Resilient economic growth continues to underpin credit markets; high yield spreads fell again last week and are nearing the 300 level, an important psychological level for investors.

   3. Economic Data Updates Are In Focus

      As February comes to a close, economic data updates are on the calendar. The Fed’s preferred inflation gauge, the PCE deflator, is the week’s highlight; expectations are for an increase in the month-over-month rate for the all-important core print. Inflation in Japan and Europe are also key monetary policy catalysts. The U.S. consumer is also in focus, as we will get two separate readings on consumer confidence during the week. Lastly, investors continue to monitor the ongoing policy actions (and market reactions) in China ahead of the much anticipated Third Plenum party gathering in a few weeks.

What Happened Last Week?

Here is a recap of the top things that happened last week:

• Nvidia, now a $2 trillion marketcap company, crushed lofty earnings expectations and sent equities to all- time highs.
• China’s equity performance picked up as investor sentiment grew increasingly bullish on market stabilization policy.
• Strong economic data continued to push back the timing of rate cuts, driving front-end yields higher.

What We’re Watching This Week

Here is a recap of what we’re watching for this week:

• Fed’s preferred inflation gauge, PCE, is expected to point to sub-3 % inflation; a surprise higher may prompt a short- term pullback in equities.
• Currency and rate markets will also process inflation data from Europe and Japan.
• Investors are cautiously monitoring for signs of a more durable rally in Chinese equities catalyzed by additional policy support for markets.

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