Stock markets globally delivered strong returns in the first quarter, driven by a combination of powerful forces: the expectation of easy monetary policy from central banks and a continued broadening of the narrative that artificial intelligence (AI) will have a majorly positive impact on companies’ profits. Bonds were the only asset not to rally, ending up slightly negative.

A Continued Rally

Of the S&P 500’s trading days in Q1, roughly 40% of them were record closing highs. This is the most since Q1 2013! A good dynamic displayed this year is that the returns in stocks have come from a broader set of sectors than just technology and communications (AI- linked sectors) in 2023. More market breadth means there’s more underlying health in the market, and generally less speculative trading driving returns.

What Are The Bulls Saying?

Market bulls (those who expect stocks to continue going up) point to a few things that could go right this year:

1. Inflation will continue to decline as issues in the supply chain that arose during the Covid era are alleviated. A mild slowing in growth will lead companies to cut prices to keep market share.

2. We won’t see any major surprises from the Federal Reserve raising interest rates. If inflation declines and economic growth is stable, the stock market will be in an environment to flourish.

3. S&P 500 companies’ earnings are expected to grow10.7% in 2024.Even if economic growth slows a bit broadly, companies still have the ability to cut costs and increase productivity..

What Are The Bears Saying?

Market bears (those who expect stocks to fall) conversely point out headwinds to stock market growth in the near-term:

1. Economic growth will actually contract in 2024. The Federal Reserve has just finished its most dramatic rate hike cycle in decades, likely choking off growth later this year.

2. Inflation expectations are anchored in consumer’s minds.Now that prices have increased, companies will continue to do so moving forward as it’s what people have come to expect.

3. The Federal Reserve will have to continue raising interest rates to fight inflation, leading to “stagflation” (stagnant growth and inflation).

Conclusion

A healthy U.S. consumer and strong labor market has set the stage for a positive 2024. As long as these factors hold true, we could see a stable economic environment and strong stock market returns in the near-term. If higher inflation continues to nag the economy and forces the Federal Reserve to raise rates, economic growth could suffer, and the labor market could weaken, putting pressure on investor sentiment. We’re here to help you solve the time horizon equation and avoid becoming distracted by the noise of the current news cycle.

Bear in mind that near-term uncertainty is the risk that yields long-term great results.

With you for the long haul,

Carter Ellis, CFP®
Founder

Disclosures:

 Past performance is no guarantee of future success. This material is for informational use only and should not be considered investment advice.

 The opinions expressed are those of Guardian Wealth Advisors, LLC. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Forward looking statements cannot be guaranteed. Investing involves risk. Principal loss is possible.

 Investment advisory services offered though Guardian Wealth Advisors, LLC D/B/A Valley Peak Financial. Guardian Wealth Advisors, LLC ("GWA") is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about GWA's investment advisory services can be found in its Form ADV Part 2, which is available upon request. GWA-22-35