CWS Market Review – March 12, 2024

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Four Years Ago Today

In last week’s issue, I talked about how this time of year has been popular for large-scale market reversals. Today, I want to start off by focusing on one day in particular: March 12, 2020, which was exactly four years ago today.

This was the point at which the world was becoming aware of the scope and magnitude of Covid-19, and March 12, 2020 became one of the most dramatic days in Wall Street history.

By the time trading was done on March 12, it was the fourth-worst day for the Dow in percentage terms in its 128-year history. Poetically, the Dow fell by 9.99%. The only days worse than that came in 1929 and 1987. Investors were completely panicked. Five of the six largest daily point losses for the Dow came in March 2020. Not only that, but six of the eight largest point gains came in that same month.

The market was particularly rattled that day because the ECB decided against raising interest rates which went against expectations. For its part, the Federal Reserve announced $1.5 trillion in open market purchases.

Trading was halted for the second time that week after the S&P 500 fell 7%. Under the rules of the New York Stock Exchange, trading is halted for 15 minutes after a 7% decline. Trading is halted again after a 13% decline. If the market falls 20% in one day, then the exchange is shut down for the day. I thought that might happen in 2020, but we steered clear of it.

On the NYSE, there were 2,376 new lows and just two new highs. The Volatility Index, or VIX, got up to 76.83. That’s close to the highest in history. The S&P 500 finished that day more than 20% off its high. This marked the first official bear market in 11 years.

On March 12, 2020, guess how many stocks in the S&P 500 were more than 10% off their 52-week high? The answer is 502. That’s not a misprint. Nor are my math skills failing me. There are 500 companies in the index but 505 stocks.

I bring these ugly stats up to show you how well the market has done since that scary day. Indeed, it wasn’t the end of the world. It was really a great time to buy assuming you didn’t panic. Over the last four years, that S&P 500 has more than doubled. If we include dividends, then the market has gained more than 120%. The VIX is now down near 14. I think most people have forgotten about March 12, 2020, but it really happened.

To borrow from Mr. Kipling, “If you can keep your head when all about you are losing theirs…then yours is the Earth and everything that’s in it.”

The U.S. Economy Created 275,000 Jobs in February

On Friday, the government said that the U.S. economy created 275,000 net new jobs last month. That beat expectations of 198,000. There was good and bad in this report.

The unemployment rate increased to 3.9%. Technically, this is the highest unemployment level in two years, but it’s still close to a 50-year low. We also had downward revisions in the December and January numbers that came to 167,000 jobs.

Another weak spot is wages. Last month, wages increased by just 0.1%. That was below expectations. Over the last year, wages are up by 4.3%.

The labor force participation rate was unchanged at 62.5%, but the “prime age” rate increased by 0.2% to 83.5%. That’s close to a 20-year high.

Here are some other details:

Job creation skewed toward part-time positions. Full-time jobs decreased by 187,000 while part-time employment rose by 51,000, according to the household survey. An alternative jobless measure, sometimes called the “real” unemployment rate, that includes discouraged workers and those holding part-time jobs for economic reasons rose slightly to 7.3%.

From a sector standpoint, health care led with 67,000 new jobs. Government again was a big contributor, with 52,000, while restaurants and bars added 42,000 and social assistance increased by 24,000. Other gainers included construction (23,000), transportation and warehousing (20,000) and retail (19,000).

In recent weeks, the weekly jobless claims reports have been stable. The economy still had almost 9 million job openings, which is 1.4 for every unemployed person.

Inflation Is Still Running at More than 3%

This morning, the Labor Department released the CPI report for February, and it was largely as expected. Last month, consumer prices increased by 0.4% which matched expectations. Over the last year, inflation is running at 3.2%. That was 0.1% above Wall Street’s forecast.

Core prices also increased by 0.4%. That was 0.1% higher than expected. Over the last year, core inflation is running at 3.8%. That was also 0.1% above consensus. Here’s a look at monthly core inflation:

While there’s no terrible news in this report, inflation is still running above the Fed’s target of 2%. If we ignore shelter costs, then inflation is running at 1.8% over the last year. It’s shelter that’s been driving core inflation.

A 2.3% increase in energy costs helped boost the headline inflation number. Food costs were flat on the month, while shelter rose another 0.4%.

The BLS reported that the increases in energy and shelter amounted to more than 60% of the total gain. Gasoline jumped 3.8% on the month while owners’ equivalent rent, a hypothetical gauge of what homeowners could get renting their properties, rose 0.4%.

A few weeks ago, I mentioned the “supercore rate” of inflation which is the cost of services except energy and housing. The supercore rate is more sensitive to labor costs, and it’s tended to remain high. Last month, the supercore rate cooled off to an increase of 0.47%. That’s down from a 0.87% jump in January.

While inflation is down from its peak from two years ago, the numbers are very stubborn once inflation dips below 4%. The stock market wasn’t terribly bothered by this morning’s report, and that seems like the right way to look at it. Growth stocks were up signicantly today while the gains for Value were more modest.

The Federal Reserve meets again next week, and I’ll spoil it for you. They won’t touch interest rates. Nor will they make any changes in May. At the start of this year, Wall Street expected a rate cut in March and May (there’s not a meeting in April).

The June meeting is a different story. I think there’s a decent chance that the Fed will shave 0.25% off interest rates. Traders still see the Fed cutting rates three times this year.

In recent days, it appears that the stock market is following an “either/or” menu. By that, I mean that either the Nasdaq Composite rises and then the Russell 2000 does the exact opposite, or the Russell rises and the Nasdaq falls. There appears to be no middle ground. Today, it was the Nasdaq up and the Russell 2000 down.

That’s all for now. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

P.S. If you want more info on our ETF, you can check out the ETF’s website.

Posted by on March 12th, 2024 at 6:23 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.