Inflation Jitters: Did The Market Overreact?

May 6, 2024

Market Recap

The stock market closed out another positive week, bolstered by a flurry of corporate earnings reports and key economic indicators. Small-cap stocks outshined the larger-cap ones during the second-most active week of the earnings season.

Apple gave investors some good news last week, however, the stock still has a lot of work to do to regain its previous highs.

Apple’s financial results, released on Thursday, provided a significant boost to investor sentiment. The tech giant not only surpassed consensus revenue expectations but also unveiled plans for a record-breaking $110 billion share repurchase program – the largest in corporate history. This announcement helped to contributed to a broader market rally.

Federal Reserve Maintains Status Quo on Interest Rates

In a widely anticipated move, the Federal Reserve’s Open Market Committee unanimously decided to keep the federal funds target range steady at 5.25% to 5.50%. The Fed acknowledged in a statement that although inflation has moderated over the past year, it remains above the desired level.

The statement also noted that in recent months, progress towards the Committee’s 2% inflation target has stalled. The Committee emphasized that it does not anticipate lowering the target range until it has greater assurance that inflation is on a sustainable path towards the 2% goal.

Inflation data remains “sticky”

During his press conference, Chair Powell reiterated the Fed’s commitment to its dual mandate of fostering maximum employment and price stability. He acknowledged the substantial progress made in reducing inflation while maintaining a robust labor market.

However, he cautioned that inflation remains too high and that the path to bringing it down is uncertain. Powell stressed the importance of restoring price stability to achieve a sustainably strong labor market that benefits all.

The FOMC decided to maintain the current policy interest rate and to continue reducing its securities holdings, albeit at a slower pace. Powell noted that the Fed’s restrictive monetary policy stance has been exerting downward pressure on economic activity and inflation. He also mentioned that the risks to achieving the Fed’s employment and inflation goals have become more balanced over the past year.

Nonetheless, the lack of further progress in bringing inflation closer to the 2% target in recent months has kept the Fed highly vigilant about inflation risks


Weekly Chart Review


What’s Going On In Your Portfolio?

Over the past two weeks, we have seen numerous buy signals within our investment models.

I was able to take advantage of the recent pullback to re-enter the market, with a focus on value names, as value has been leading the market higher over the past two weeks.

Utilities, Insurance, and Regional Banks have performed well, as well as MidCap value. As the market continues to rotate I will be looking for further opportunities.


Upcoming Economic Data to Keep an Eye On

Source: Trading Economics


By John Rothe, CMT

Founder & Chief Investment Officer

Riverbend Investment Management

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