Big Fiscal is exciting!  Just don't hit a tree. Big Fiscal is exciting!  Just don't hit a tree.\images\insights\article\skis-mountains-small.jpg March 1 2024 March 1 2024

Big Fiscal is exciting!  Just don't hit a tree.

2024 could be a great year if we navigate it right.

Published March 1 2024
My Content

I enjoyed my annual trek through North Carolina this week, with advisor stops at Pinehurst (among the most beautiful of venues, with among the largest and most gracious of groups), Raleigh, Greensboro and Charlotte. Seasoned advisors share their clients’ dismay at election season, “Clinton has been out for 25 years and he’s still younger than both of them!” marveling at a choice 70% of Americans don’t want. So many veterans with such varied convictions on positioning, including: “it’s all about shielding taxes,” “it’s as simple as holding a cash buffer and investing for growth,” “it will remain a growth market—I haven’t been so bullish since November 2008!” and “retirees want to sleep at night—I invest for income.” Growth bulls have been winning the debate so far this year, for a reason. FactSet says that the six biggest tech companies had 53.7% year-over-year earnings growth last quarter vs. a 10.5% contraction for the other 494 companies in the S&P 500. Still, we are seeing some hints of the broadening we’ve been waiting for. The equal-weighted S&P 500 is now just 1.5% away from its all-time high set in January 2022. The S&P 500 is about to have risen 16 of the last 18 weeks, something that hasn’t happened since 1972. Over the last 100 years, the market, on average, is higher 13 and 26 weeks after such a run. And, this clearly momentum-driven market is not quite at an extreme at the 84th percentile. A move away from momentum toward high quality would be a bearish indicator—but a move towards low quality stocks would be a sign of increasing breadth. Does the Fed have the tea leaves for what happens next? Historically, twelve months after periods of rising real fed funds rates, equities have been up double digits four out of nine times, but have fallen the other five. It all depends on whether or not the Fed “breaks something.” Want to place a bet?

But never fear, Big Fiscal is on its way. The long and variable lags of the Fed’s rate hikes may be ready to bite, but a fiscal stimulus worth up to 1.5% of gross domestic product may come soon. Some pieces of this election-year Washington shot in the arm are already in motion—the latest round of Biden’s student loan forgiveness and the disbursement of billions to domestic chip makers. The last hurrah of the Covid-era Employee Retention Credits could add at least $70 billion to the economy. The Senate has passed a $95 billion package with aid for Ukraine and Israel, which now awaits a diffident House. The House has passed a $78 billion tax cut bill, which now awaits a diffident Senate. Just a couple of bills? Piper Sandler thinks prevention of a recession hangs in the balance. With Japan, the U.K., Germany and China becalmed, Yardeni thinks the robust U.S. economy is what’s keeping a global recession at bay. It’s an election year, and these are politicians. Deal or no deal?  

Following a booming end to 2023, we may be slowing down over the course of this year to a “new normal,” one where growth moderates, rates stay up and cuts are but few. Where Covid stimulus is gone, spending and employment soften, and the inflation genie is put away. The pre-Great Recession “normal.” Not a bad outcome. But for now, North Carolina advisors marvel at the current state of the worker/investor generation—“The so-called ‘WFH’ will be the first laid off” and “they think fed funds will go back to zero!” And, of course, FOMO—I was questioned about whether crypto came up in advisor or client meetings this year. But nope, only the Mister is fascinated. But AI is on everyone’s radar, to include a “95-year old investor.” Many of these advisors are avid skiers, but this market wants more adrenaline. “Suggestion: tree skiing. The trick is not to look at the tree, for if you look at it, you will hit it!”


  • Inflation drifts lower Core PCE fell to 2.8% year-over-year in February, matching expectations. Core PCE rose 0.4% from the month before, as expected; these readings stand in some contrast to this month’s frothy CPI report. Due to higher equity prices, portfolio management was among the leading causes of the increase. 
  • National factory slowdown S&P Global’s U.S. manufacturing PMI rose more than expected in February to its highest level since July 2022, as factories labored to replenish depleted inventories. A contrary signal came from the ISM manufacturing index, which declined somewhat more than expected in February. 
  • Regional factory slowdown The Dallas, Kansas City and Richmond Fed’s manufacturing indexes continued to fall, but the readings were a bit better than expected (Dallas and Richmond) or forward expectations were somewhat positive (Kansas City).  


  • Consumer senses a slowdown Consumer confidence dipped unexpectedly in February, the Conference Board said. The University of Michigan’s consumer sentiment index, falling unexpectedly, confirmed the dour finding. One bright spot in the Michigan data: consumers haven’t increased their long-term inflation expectation of 2.9% over the next 5-10 years. 
  • Construction slowdown Construction spending fell 0.2% in January, the Commerce Department reported vs. an expected increase of 0.3%. This, the first decline since December 2022, was mainly due to softer outlays on public projects; spending on residential housing rose modestly. Also, the Census Bureau reported that durable goods declined more than expected in January.
  • The weather ate my new house Sales of new homes rose less than expected in January, the Commerce Department reported, even as the supply of existing homes for sale remained feeble. Frigid temperatures in much of the country were blamed for some of the weakness. The Case-Shiller 20-City housing index rose 0.2% in December from the month before, meeting expectations. The home price index is at an all-time high and up 6.1% for the year. 

What Else

Make politics boring again One-third of Republican voters say they would not vote for a convicted felon for president. On the other hand, with the slight exception of Pennsylvania, Trump is ahead against Biden in all swing states. 

Border politics Both President Biden and former President Trump made trips to the Mexican border this week, an indication of the renewed salience of the immigration issue. For the first time, a majority of Americans favor building a wall along the southern border. 

Kids are expensive As of January 2024, women 25-54 years in age have a labor-force participation rate of 78% vs. 89% for men. One reason may have to do with childcare, the cost of which has risen 32% above 2019 levels.

Tags Equity . Inflation . Politics .

Views are as of the date above and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector.

S&P 500 Index: An unmanaged capitalization-weighted index of 500 stocks designated to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Indexes are unmanaged and investments cannot be made in an index.

The University of Michigan Consumer Sentiment Index is a measure of consumer confidence based on a monthly telephone survey by the University of Michigan that gathers information on consumer expectations regarding the overall economy.

Consumer Price Index (CPI): A measure of inflation at the retail level.

The Personal Consumption Expenditure Index: A measure of consumer inflation at the retail level that takes into account changes in consumption patterns due to price changes.

The Institute of Supply Management or ISM nonmanufacturing index is a composite, forward-looking index derived from a monthly survey of U.S. businesses.

The S&P/Case-Shiller Home Price Indices measure track changes in the value of the residential real estate market in major metropolitan regions.

Purchasing Managers’ Index (PMI) is an index of the prevailing direction of economic trends in the manufacturing and service sectors.

Stocks are subject to risks and fluctuate in value.

The Federal Reserve Bank of Dallas' monthly Texas Manufacturing Outlook Survey is a measure of the current level of activity and expectations for the future.

Federated Equity Management Company of Pennsylvania