The first week of the new year got off to a slow start. As might be expected, investors are diligently trying to figure out what’s in store for the U.S. economy in 2024. Unlike the start of last year when analysts were almost unanimously convinced a recession was imminent, this year analysts are all over the map. Some predict rate cuts by the end of the first quarter, while others suggest maybe in the second half of the year. I suspect we’ll see a lot of churn in January as various ideas compete in the markets. It will likely take a couple months to see a trend emerge from the current noise.
As for economic data, we received some today in the form of the U.S. Nonfarm Payrolls report. You’ll remember that we’re looking for a gentle slowing of the economy with evidence of a slow decline in job growth. With that in mind, economists were looking for the jobs number to come in at or below 170,000 for the month of December. Instead, it showed consistent growth of 216,000 jobs gained. You might expect this to be a case of good news being viewed as bad, but this early in the year investors are still trying to figure out what to think. The markets reacted ambivalently to this news, which was a bit surprising. The unemployment rate remains at 3.7% with job gains coming mainly from government and healthcare. This caused some to speculate that another rate hike is on the table, but I don’t imagine that’s the case. My hunch is the Federal Reserve will wait out either cuts or hikes if it can, hoping the economy eventually slows to within the range it is looking for.
While you may still be thinking about the better-than-average year that just ended, you may not realize that the S&P 500 has yet to retake the high it recorded back on January 3, 2022. This marks the sixth longest trading-day gap between record highs. The five other largest gaps between highs were recorded in 1928, 1954, 1958, 1980, and 2013. According to Ned Davis Research, “There have been 14 cases of the S&P 500 going at least one year without an all-time high. After the record has been eclipsed, the S&P 500 has outperformed its long-term average one, three, six, and twelve months later.” Yet it also bears remembering, we’re coming off a nine-week winning streak, the longest winning streak since 2004, and a little bit of consolidation makes sense here. Additionally, 2024 is an election year which will play a role in the “choppiness” of how the market will perform this year. One thing is certain, whether the markets make new highs or not, it will not be in a straight line, and one should expect some ups and some downs along the way.
In company news, it seems Steamboat Willie is free from copyright protection. Steamboat Willie is Disney’s precursor to Mickey Mouse. Not wasting a moment, a horror film production including Steamboat Willie has begun. Director LaMorte believes that while, “Steamboat Willie has brought joy to generations, beneath that cheerful exterior lies a potential for pure, unhinged terror.” Maybe this is just a sign of the times or perhaps I’m just getting old. But why?
In other company news, Amazon Prime will begin placing ads in movies starting soon. It is estimated the company can earn approximately $5 billion annually by doing this. The question is whether Prime members care enough to push back. My bet remains on Amazon. Also, Ford announced it is increasing the price of most of its F-150 Lightning models anywhere from $5K to $10K, bringing vehicle prices to between $54,995 and $92,995. In the same statement, believe it or not, it announced cuts to its Lightning production by 50% citing the slower pace of EV adoption. You can’t make this stuff up. I wonder if they raise prices further they may sell more? (I’m joking of course.)
In closing, I turn to what will undoubtedly be a controversial story. I read this week that Carrefour, one of the largest supermarket chains in France, will begin pulling Pepsi products from its shelves this Thursday. In its announcement, the company said, “We are no longer selling this brand due to unacceptable price increases.” The protest is against seven consecutive quarters of double-digit price increases and ever-shrinking package sizes. Even my daughter mentioned recently that the “Family” size and “Party” size packages of chips these days are ludicrously small. Apparently, Carrefour doesn’t believe the smaller package sizes are for portion control as Pepsi suggests. Now you know.Bruce J. Mason, MBA