Market Outlook - April 2024

MSB Wealth - May 21, 2024
Our outlook on the markets from our April 2024 market commentary
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At this time, it kind of feels like a waiting game as investors in North America hold their breath for a rate cut decision from central banks. It is evident that trading will be choppy from here on out as investors react to news, either risk on or risk off, depending on the Feds’ overall tone. We were surprised the market didn’t dip more than it did in April noting the consensus for 6 rate cuts in the U.S. at the start of this year is now down to 1 or 2 cuts, or perhaps even none in 2024. The expectation in Canada for a rate cut as early as June remains, but given the economic outlook in the U.S. vs Canada, it puts the BoC in a tough position, stuck between a rock and a hard place with not being able to diverge too far from the Fed. While the Federal Open Market Committee (FOMC) meeting wasn’t a massive market mover, Powell’s reassurance that rate hikes were unlikely, and a slightly larger-than-expected dampening of quantitative tightening (QT) was mildly helpful. It was really the April employment report that pushed on an opening door of lower yields, with payrolls rising just 175,000, the jobless rate ticking up to 3.9%, and the average hourly earnings cooling to the slowest pace in nearly three years at 3,9% y/y. The key takeaway from the Fed is that while Powell sees policy rates as restrictive, the job market appears to be softening somewhat. Sustained weakness in growth could prompt the Fed’s to begin loosening, but only if inflation stops deteriorating. A combination of mild inflation and slowing growth could be the ticket, but we won’t know until mid-May.