Dear Client, Prospect, Partner:
Does this rally that started in early November 2023 have the legs to continue? The market run-up has subsided here in the last week, but we will see what earnings season has in store for us as the banks report including JP Morgan, Citigroup and Bank of America today and next week. It’s especially interesting for us as holdings such as Lululemon, Palo Alto Networks and several others had strong fourth quarters, but the outlook was tempered, and the stocks were punished. Both of these have been tremendous 5-year holdings so we will see if the outlook and earnings expectations are better this time around.
The March jobs report surprised many economists to the upside as the labor markets continue to demonstrate growth. Nonfarm payrolls jumped by 303,000 in March, which was considerably higher than the anticipated 195,000 figure. The unemployment rate fell slightly to 3.8%. Since August of 2023 the unemployment rate has posted within a narrow range of 3.7%-3.9% and jobs have remained robust. The inflation report, however, this week caused some problems. Consumer prices rose 3.5% in March worrying news for the Federal Reserve as the ponder rate increases for the rest of 2024. The temperature has changed with their outlook on cutting rates three times in 2024 as inflation continues to be a concern. The logic here is if the Fed does not cut rates this summer, then it will be hard for them to do it going into an election in November. We will have to wait and see.
Consumer credit has reported a year-over-year increase of 4.7%. Revolving credit, like personal lines of credit and credit cards surged 7.6% compared to January of the previous year. And perhaps most concerning is credit card delinquency rates have climbed to their highest level since Q4 of 2011. People are still struggling with higher food costs, entertainment increases and gas prices. This is indicative of the stubborn inflation rate not getting better fast enough for many Americans.
AI hardware continues to be a hot topic of conversation and it appears it is changing the way many corporations conduct their business and consider future hires. While we have had some larger companies such as Microsoft, Alphabet (recent addition) and Amazon that are using some of these technologies, there are several other smaller companies that we may be wading into based on their outlooks and their exciting and innovative technologies they are developing.
Sincerely,
J.B. L’Esperance, ChFC
If you have questions about our strategies or would like to open an account with Barking Sands Capital, please give us a call at 952.500.8854 or 248.687.1400 or email us at jb@barkingsandscapital.com.