DIASTOLE ECONOMIC AND MARKET COMMENT
February 5, 2024
We thought the big news of the week would be the Federal Reserve’s decision on Wednesday to do nothing with interest rates. That was expected; after all, doing nothing is a policy choice. But it turned out that the really big news of the week was the jobs report for January, which was issued on Friday.
Experts, analysts, and talking heads were predicting 175,000-185,000 net new jobs created in January, but the actual figure came in at 353,000. Wow, wow, wow. And on top of that, December’s new jobs number was revised upward from 216,000 to 333,000. More wows!
The unemployment rate remained unchanged at 3.7% - and has now been under 4% for two years. That’s the longest such stretch since the 1960s. Average hourly wages grew in January by 0.6% (month-over-month) to $34.55 per hour. And that’s up 4.5%, year-over-year.
With inflation running about 2.6-2.9% based on the personal consumption expenditures price index, which the Fed favors, workers are finally seeing actual wage increases.
The Fed is looking for inflation to drop to 2%, and is unwilling to just hope that the inflation rate will continue to slide on its own. (But is no doubt happy not to be seeing inflation at 7-9% any more.)
Perhaps it’s no wonder, then, that Fed Chairman Jerome Powell appeared last night on CBS’s “Sixty Minutes” to discuss the economy and downplay the likelihood of an interest rate cut coming at the Fed’s next meeting in March. More people working, and making more money, are factors that could push inflation higher, if you think of inflation as too much money chasing too few goods and therefore pushing the costs of those goods higher.
Another economic factor that could put more money in people’s pockets is the stock market. It has become almost ho-hum to see the Standard & Poor’s 500 and the Dow Jones Industrials Average hit new record highs. The S&P has hit seven record highs in 2024, while the Dow has hit nine. The Nasdaq Composite Index, which has risen the most over the past year, is within 2.5% of its record high. All three indices have posted four consecutive weeks of gains, after beginning the year with weak performances.
The Magnificent 7 stocks (Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, Tesla) are still leading the way, except for Tesla which is now lagging. So maybe it’s the Magnificent 6? Nvidia ( a chipmaker - but not the delicious kind) was the leader last year, up 235%. Tesla has been recently beset with woes like a general recall of 2.2 million cars due to too small fonts on the dash, and ongoing issues with its autonomous driving mode. But a Delaware judge’s recent finding that Elon Musk’s compensation package was excessive may leave a little more money in the company, which should please shareholders, after they get over feeling sad for Elon.
Meanwhile Meta, parent company of Facebook (happy 20th birthday!) has declared a dividend for the very first time. The stock is already up 433% since its low in late 2022, and may ride this dividend higher. Dividend-paying stocks are often considered more conservative, so this dividend declaration may allow Meta to be held in more kinds of portfolios. Mark Zuckerberg, head of Meta, is due to receive about $700 million per year from this dividend.
Apple ended four straight quarters of losses on Thursday, and also announced on Friday that its virtual-reality headset, the Vision Pro, is available for purchase. It makes wearers look like insects, and it costs $3,500, but the Vision Pro is a computer and camera for your face, which uses something Apple calls “spatial computing”. CEO Tim Cook said at the unveiling that the Vision Pro “works the way the mind works. People put it on, and they instantly know how to use it.” But do they instantly know how to pay for it?
It may surprise you to realize that online shopping only represents about 16% of overall retail sales. The rest happens in brick and mortar stores. Think of all those Amazon boxes on your porch and then picture five times as many boxes coming from Walmart. Your porch isn’t big enough!
In the last three years, at least 24 homes in the U.S. have sold for $100 million or more. If you have neighbors, it’s not you!
For the week ending on February 2nd (Groundhog Day!) the S&P 500 finished at 4,958, the Dow Industrials at 38,654, and the Nasdaq at 15,628. The yield on the ten-year Treasury Note closed at 4.03%. U.S. crude oil cost $72.28 per barrel, N.Y. gold cost $2,053.70 per ounce, and one Euro was worth $1.08.
Elizabeth E. Cook
Partner, Diastole Wealth Management
News and information presented here was gathered from sources believed, but not guaranteed, to be reliable, including (but not limited to) The Financial Times, Barron’s, MarketWatch, Bloomberg, The Economist, Yahoo Finance, Fortune, Business Insider, CNN, CNBC, Reuters, and The Associated Press. If you have questions, please call us at 203.458.5220.
The next Super Bowl takes place on February 11th, and for a mere $9,815, you can buy a ticket to see the game in Las Vegas. Oh wait, that was the original price. Now that it’s sold out, you can only buy a ticket on the secondary market, and prices are MUCH higher. Especially if you need to factor in your new Vision Pro headset which will do something amazing that no one can explain while you watch the game.