Weekly Outlook

• Busy week ahead right into Seasonal headwinds.

• S&P500 hit $5000 for the first time last week.

• CPI, PPI, Industrial Production, and Retail Sales numbers will be released this week.

What’s happening now?

The grind higher continues as the S&P500 hit $5000 for the first time last week.

Seconds before the close on Thursday, Feb 8th, the S&P jumped to $5000.40 before quickly retracing and closing at $4997.92. The charge higher continued on Friday which saw the S&P500 close above $5000 for the first time, ending the week at $5026.62.

Three out of the four major indices, S&P, DJIA, and NASDAQ, are now trading at new all-time highs.

The new highs and continued higher highs and higher lows in the S&P, NASDAQ, and DJIA along with relative strength from the IWM the past week provide further proof to expect more strength and growth in 2024.

Busy week of economic data ahead.

There are four significant data releases this week. Together, they will tell you whether the upcoming months will continue along a clear path of continued economic growth or if the view becomes a little more murky.

Tues. Feb 13th: CPI (Inflation)

Current expectations for CPI is 3.8% YoY for January.

Inflation jumping back to 3.8% or higher could begin to throw the current path of Expansion off course.

It is still too early for the economy to be feeling a significant effect of any goods inflation which may come as a result of shipping issues in the Suez Canal. Gas and residential rental prices are lower than they were a year ago, and food inflation is back in line with a ~2% YoY growth rate.

Tough to see how CPI comes in at or above 3.8%, but if it does then it would be a red flag to watch next month. The last thing in the world you want to see at this stage is a new trend higher in the rate of inflation.

The further away the economy is from 2% inflation, the further away The Fed is from cutting interest rates.

Thurs. Feb 15th: Retail Sales

Consumer spending represents about 2/3 of the US Economy, which is why it’s always important to watch for big surprises in either direction.

Current expectations are for a gain of 0.1% MoM for January.

Thurs. Feb 15th: Industrial Production

Industrial Production, which measures the change in the value of output by manufacturers, mines, and utilities is expected to continue pushing higher with MoM expectation currently sitting at 0.3%.

Fri. Feb 16th: PPI (Producer Inflation)

PPI, which measures the prices paid to producers for their output is expected to come in at 0.1% MoM.

Seasonally

No matter how you look at it, the economy remains robust and stock markets are telling you to expect this trend to continue.

While markets are rolling into a seasonally “weaker” time of year, it is important to note that it is doing so in the middle of the most bullish time of year. So while a retracement in the markets is expected and warranted after the run-up since late October, best not to expect a full-blown correction at the moment.

It would not be surprising to see small-caps (IWM) play catch-up with the other three indices and exhibit some relative strength over the coming weeks. In fact, it would be more proof yet of a resilient economy that continues to strengthen, giving you another reason to expect it to last in the coming months.

***The following was added the evening of the original post.*** Feb. 12, 2024 8:15pm MST

Seeing now that consensus CPI YoY estimates are for 2.9%, not 3.8% as showed above. The original figure came from Investing.com, which is typically reliable.

This makes much more sense as 3.8% seemed way too high of an estimate for tomorrow morning’s report.

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