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04/08/2024 Market Strategy

  • John Stoltzfus
  • April 8, 2024

When Good News Disappoints

Last week’s resilient economic data led those hoping for a Fed pivot in June to reassess

Key Takeaways

  • Q1 earnings season unofficially kicks off on Friday when several large banks report results. Bloomberg published bottom-up estimates for earnings growth at 3.9% from a year earlier. If realized, this would be a slowing in growth from the nearly 8% pace of Q4.
  • The price of gold reached new record highs last week as some central banks purchased the metal to shore up their currencies and as some expect a decline in the US dollar on a Fed pivot to lower rates.
  • Last week’s jobs report surprised to the upside with a 303,000 gain in payrolls and a decline in the jobless rate. The ISM reports also showed strength as manufacturing activity moved the index into expansionary territory.
  • This week brings the consumer price index data for March, the first readings on inflation for last month. Consensus estimates are for 0.3% monthly gains in both the headline and core indexes. 
abstract financials

Last week saw resilience in economic data tied to the jobs market as well as stickier than expected inflation cause a jump in volatility that sent stock and bond prices lower.

Oil prices advanced after the US Energy Information Administration forecast global inventories would fall by some 900,000 barrels a day raising concerns among traders that rising demand could push prices higher. A confluence of factors including OPEC and its partners’ plans to reduce production, Mexico’s move to cut its crude exports, increased geopolitical tensions, and rising demand as economic conditions improve have contributed to a steepening of the proverbial “wall of worry” for markets to climb at least for the near term.

Quotation from Aenean Pretium

We can’t help but think that the age-old market adage that “the only cure for higher prices is higher prices” may well apply to the price of gold this cycle.

A Mixed Bag of Factors Power Gold Rally

The price of gold hit new record highs last week (see graph nearby). Purchases of the precious metal by central banks of emerging market nations looking to shore up their currencies, as well as investors seeking to use gold as a hedge against a strong dollar along with hedging against prospects that the dollar could fall when the Fed gets closer to cutting rates have all contributed to gold’s rally this year.

From a perspective of anecdotal evidence we can’t help but think that the age old market adage that “the only cure for higher prices is higher prices” may well apply to gold this cycle.

We recall that in past cycles the longer and higher that gold’s price rises the more that ads for buying gold tend to appear on television and in publications. Next often follows a surge in silver prices as the metal that usually lags gold garners investors’ and traders’ attention as a “catch up” trade. The longer that gold and silver rally the more likely that stocks in miners of these metals find tail wind.

For now we remain positive on stocks and suggest that investors seek out “babies that get tossed out with the bathwater” in stock market pull backs. The recent rise in bond yields and commensurate ebbing of bond prices suggests to us that fixed income remains complimentary to stocks for investors seeking income and portfolio diversification.

Inflation Data and Bank Earnings on Tap this Week

In the week ahead investors will likely look to the minutes of the Fed’s March FOMC meeting, the CPI, the PPI, along with data on real hourly and weekly earnings for guidance of the direction markets are likely to move.

In our view for all the success the Fed has had over the course of the last two years in curbing the pace of inflation a “last hurrah” for price pressures still eludes the Federal Reserve while some market participants still wait for rate cuts sooner than the Fed is likely to opt for. We have found that patience is indeed a necessary virtue for investors to practice particularly when the Fed is dealing with sticky inflation.

Investors will soon begin to look forward to Q1 earnings season which unofficially gets underway this Friday when the big banks begin reporting their results.

Bottom-up estimates from Bloomberg put projected earnings growth at 3.9% in Q1 from a year earlier, which would mark a slowing in growth after the nearly 8% growth rate of Q4.

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John Stoltzfus


Chief Investment Strategist, Oppenheimer Asset Management Inc.

John is one of the most popular faces around Oppenheimer: our clients have come to rely on his market recaps for timely analysis and a confident viewpoint on the road forward. He frequently lends his expertise to CNBC, Bloomberg, Fox Business, and other notable networks.

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