Equity markets continued their strong start to the year in February, with the S&P 500 logging its fourth consecutive monthly gain on the back of blowout earnings from chip maker and AI leader Nvidia. The blue chip index gained 5.3% in February and is up 7% year-to-date.
Smaller company stocks made up some ground in February, rallying +5.7% this month for a +1.5% gain so far this year.
Overseas stocks continue to lag domestic competitors, with the MSCI ACWI ex-US index adding just +2.4% in February for a +1.3% YTD return.
Within fixed income, yields rose as inflation re-emerged in the January data, with the ten-year ending the month at 4.25%. Bond prices fell as a result, with the Bloomberg US Aggregate Bond Index losing -1.4% in February for a -1.7% full year return.
Commodity prices pulled back -1.5% in February, though digital assets soared, led by a +44% surge in Bitcoin prices as ETF adoption continues to gain steam.
Our data driven Three Dials readings were once again unchanged in February, as we outline below:
- Market Sentiment and Momentum: (Positive ➕)
According to Bespoke Investment Group, the S&P posted five consecutive weekly gains of at least 1% between January 8th and February 9th, the first such streak since 2016.
Despite a brief pause mid-month, equities continued their rally into month-end, leaving our Momentum Dial in a Positive position.
- Economic Fundamentals: (Negative ❌)
After showing signs of life last month, new manufacturing orders contracted in February, suggesting that the persistent high interest rate environment continues to provide a headwind to future economic activity.
With the Fed’s first rate cut potentially on hold until June, our Economic Dial remains in a Negative position for now.
- Valuation: (Negative ❌)
While last year’s tech rally relied primarily on multiple expansion, so far the story of 2024 has been backed by fairly strong earnings growth. That said, high discount rates leave P/E ratios stretched, and as such our Valuation Dial remains Negative.
Our composite Three Dials reading remains in a Moderately Defensive position through the month of February, with two dials Negative and one dial Positive.
Sources: Morningstar, Bitcoin Historical Data
Disclaimer: Our intent in providing this material is purely for informational purposes, as of the date hereof, and may be subject to change without notice. This article does not intend to constitute accounting, legal, tax, or other professional advice. Visitors and readers should not act upon the content or information found here without first seeking appropriate advice from a trusted accountant, financial planner, lawyer or other professional.
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