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Market Volatility Ahead: What the Economy Is Telling Us Now

March 11, 2024
By Michael List, CFP®
Investment Management Officer
Market volatility will likely increase as we enter the show-me phase of the cycle.  The economy will need to show resilient growth and slowing inflation and companies must show they are able to meet or exceed revenue and earnings expectations.  Last week we saw several employment reports indicating a strong labor market and this week we will see updated inflation figures with CPI (consumer price index) and PPI (producer price index).  Earnings season is also coming to an end, before it starts all over again in April.

The first week of the month is always full of employment data.  The Bureau of Labor Statistics reported 275,000 new jobs created during the month of February and the unemployment rate ticked higher to 3.9%.  Both of these figures came in above expectations of 200,000 and 3.7%.  A few days earlier, ADP reported that private employers added 140,000 jobs which was below expectations, but higher than the previous month.  Overall job and economic growth have shown resilience.

This week we will receive the last inflation update before the Federal Reserve’s meeting.  Consumer prices are expected to increase 0.4% while producer prices are expected to rise 0.3%.  This would continue the trend of higher inflation seen over the past several months for both measures.  These monthly readings are more volatile especially when it comes to headline inflation which includes food and energy prices.  Analysts will often look at core CPI (excluding food and energy) and the annual change in index value, to get a better sense inflation over time.  Core CPI has been hovering around 4.0% over the past six months, but analysts expect it to decline to 3.7% in February.   

We are finishing up earnings season as well.  This season was better than expected with three quarter of companies reporting higher earnings than analysts forecasted.  As a whole, revenue growth was 3.8% while earnings grew 6.9%.  Current estimates are for both revenue and earnings growth rates to increase into 2024 and 2025.

Thus far data has been pretty good allowing the market’s advances to continue, but that will not always be the case.  Whether that change is triggered by the natural cycle of economic activity or growth expectations reaching loftier levels, is yet to be seen.  Volatility is a natural and necessary element of financial markets.  While volatility can cause discomfort, it often does not have a meaningful impact on our long-term financial goals and it can provide new investment opportunities.  If you would like to review your accounts or update your financial plan, please contact your AdvisorYour financial success matters to us!

About the Author

Michael List, CFA, CFP®

Michael List is an Investment Management Officer within Security National's Wealth Management Division. Michael earned his Bachelor of Science in Business Administration with a concentration in Finance and Economics from Creighton University and holds the esteemed Certified Financial Planner, CFP® certification. List helps execute investment strategy, transactional execution and overall portfolio management. Having dedicated 14 years to the field of Wealth Management, Michael List brings a wealth of experience to his role, contributing to the success and growth of Security National Bank since 2008.