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Market Update | February 19, 2024

The S&P 500 index of large U.S. stocks closed above the 5,000 level on February 9 for the first time in history. Last Monday the index also ended above the psychologically important (yet otherwise not important) 5,000 level. Strong economic data, encouraging corporate earnings, and the rally in technology shares contributed to the milestone being met.

Then stocks tumbled last Tuesday as investors got jittery about interest rate hikes. The inflation reading announced on Tuesday showed consumer prices increasing 3.1% since January 2023, higher than the 2.9% that analysts expected. As the market took time to digest the data and the implications of the Federal Reserve not dropping interest rates as soon, much of last week was higher. The S&P 500 ended Friday at 5,005.57.  

Fear and greed are the two halves of the investor psychology coin. Investor psychology can take over and push markets in directions that don’t always jibe with the underlying financial and economic fundamentals. We’re seeing that push-pull in action right now as investors weigh the likelihood and timing of future interest rate cuts and price out different scenarios.

What’s the bottom line, in our view? Volatility is present although nothing unusual. We’ll likely see markets continue to rally and retreat as investors consider their next moves and price in new data. This is typical along the course of investing.

For us long-term investors, week-to-week market movements are essentially irrelevant. As investment advisers, we keep up with weekly and monthly economic news because it helps us stay informed of larger trends. That’s different than feeling a psychological need to respond to short-term noise.

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