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Juncture Wealth Strategies - April 2024 Market Update Thumbnail

Juncture Wealth Strategies - April 2024 Market Update

Economic & Market Forecast

Bond Markets
Equity Markets
2024 Predictions

Economy: Global Manufacturing

The manufacturing sector has begun to turn higher. Manufacturing may be signaling that the global economy is recovering as manufacturing plants can have a multiplier effect on local economies. It is estimated that a $1.00 spent in manufacturing generates $2.69 for the US economy. Put another way, one manufacturing employee provides enough activity to support 4.8 workers in the overall economy. Aggregating those local impacts may lead to decent economic growth over the next few years. It is uncertain how much of this activity is related to recent US legislation enacted to entice US companies to domicile their manufacturing plants within the US.

Economy: Employment

A strong labor market has been one of the resiliencies in the US economy. Economists are debating whether high interest rates have yet to impact certain sectors of the economy. The National Federation of Independent Businesses (NFIB), a group which represents small businesses, regularly surveys its members regarding topics relevant to small business. One such survey queries how many businesses are planning on adding versus cutting jobs. As shown below, small business continues to add employees albeit at a slower pace. It suggests decent economic growth amidst a softening labor market.

Economy: Employee Costs

A key concern for most businesses has been employee costs because of higher wages and benefits. These higher costs can reinforce inflation as higher wages encourage workers to spend more keep prices of services of goods and services high. Wage growth has been decelerating but remains elevated.

Economy: Real Wage Growth

Real wage growth (wage growth minus inflation) is beginning to regain part of the purchasing power lost over the past few years.

Higher real incomes may encourage consumers to continue spending. The chart below shows cost of wages and salaries less

inflation. It provides a proxy of workers’ real wage growth and shows that workers are still making up for the loss in purchasing power experienced since 2021.

Economy: US Gross Domestic Product (GDP)

The US economy has continued to show strength. The Conference Board’s 2024 US Economic Outlook updated its forecast for US GDP growth, and it estimates the economy will slow in the second and third quarters and rebound in the fourth quarter. An important expectation for GDP growth is that the Federal Reserve will decrease interest rates during early to mid-2024. If lower rates are delayed later this year, GDP acceleration will be pushed into 2025.

In conclusion, the economy will slow in the second and third quarters and strengthen in the fourth quarter. The risk may be to an

upside surprise if the consumer and manufacturing sectors remain strong.

Inflation: Money Supply

Money supply is the fuel for inflation over a long period of time. We analyze the change in various money supply measures to assess the likelihood of future, persistent inflation. As shown, different money supply measures peaked in 2022 and have declined since that time. The M1 money supply (currency, checking and savings accounts) has declined by approximately $2 trillion while the M2 (M1, money markets, and small CDs) has declined by approximately $1 trillion. We continue to expect disinflation over the course of the year. As with all economic data, we do expect some months of higher inflation within the disinflationary trend.

Inflation: Truflation

Technology and big data change our personal lives but also affect economic indicators like inflation. Truflation, an economic data analytic company, uses large amounts of data (13 million data points versus 80,000 for traditional measures) to calculate their estimate of the “current” inflation rate. If accurate, Truflation estimates current US inflation at 2.34% as of April 26, 2024, which is near the Federal Reserve’s target. It is important to note that inflation hit a nadir in February 2024 at 1.90%.

Inflation: Components

The reported CPI inflation rate in March 2024 was the third month in a row where the report was higher than expectations. This reversal on inflation has caused investors to reassess their forecasts for future inflation and, consequently, interest rate policy. We believe the concern is overdone. If CPI is broken down into its components, then we see that Shelter has contributed significantly to inflation. Factoring out Shelter, CPI is in the Fed’s target range. If we forecast Shelter inflation based on its historical relationship to the Cleveland Fed New Tenant Repeat Rent Index, then Shelter inflation should continue its decline as shown in the chart of the left.

Inflation: Expected Inflation

Based on the contracting money supply and stable supply chain, it is unsurprising to see expected inflation decline to within the Federal Reserve’s target range in early 2024. As shown in the chart, the most recent expectation of inflation (blue line) drops into the mid-2% range in 3 months and continues in that range for the foreseeable future. This should allow the Federal Open Market Committee (FOMC) to reassess how high interest rates need to be. If the economy slows more quickly or aggressively than anticipated, the FOMC will feel more comfortable lowering short-term rates.

In conclusion, we expect that inflation will most likely be within the Fed range by year end. If inflation reaccelerates, our prediction may be delayed into 2025.

Bonds: Future Interest Rates

Bond traders have begun to price in lower interest rates in response to weaker economic data and lower inflation. This chart shows that futures markets are currently projecting 0.25% to 0.50% interest rate decreases in 2024. This is a volatile measure and will change as more economic data is reported. We expect the Federal Reserve to hold interest rates steady until inflation is nearly to the target range of 2%. Expected interest rate decreases may cause fixed coupon, high credit quality bonds to outperform.

We expect bonds to provide decent returns based on the declining interest rates in the second half of the year.

Equities: Earnings Growth

The Magnificent 8 (now Magnificent 5) stocks have provided the most earnings growth over the past few years. However, it is projected that the S&P 495 (S&P 500 minus the Magnificent 5) will begin to catch up in terms of earnings growth. While the Magnificent 5 has produced tremendous earnings growth, the group is also priced expensively relative to those earnings when compared to other parts of the equity market. We measure how much we pay for $1 in earnings using the Price to Earnings (or P/E) ratio. As of April 22, 2024; the average P/E ratio of the Magnificent 5 is 41.8x while the S&P 500 has a P/E ratio of 25.3x.

The S&P 500 is a capitalization-weighted index and is heavily skewed by the Magnificent 5. As such, we look to the S&P 500 Equal Weight Index to obtain a better

indication of the broad equity market’s P/E ratio which currently stands at 20.9x. High P/E stocks can do well if they continue to have relatively high earnings growth. However, the trend is changing and this change should help the other large cap, mid cap and small cap stocks participate in the current equity bull market.

Equities: Growth versus Value

In our last Update, we discussed small cap stocks being a way to expose a portfolio to earnings growth. Similarly, value stocks which have underperformed in recent years due to lower (or negative) earnings growth. Value stocks are generally considered to have more risk inherent in their businesses due to higher fixed costs and debt loads.

However, if the Fed begins lowering rates, then value stocks may be poised to increase their earnings faster than growth stocks. Higher earnings growth may translate into better stock returns. One overlooked aspect of value stocks is that they also tend to pay higher dividends. Our analysis suggest we may see a change in stock leadership in 2024 if the US economy continues to grow at a slow pace.

Equities should continue to do well this year as earnings begin to underpin valuations. The stock market will continue to climb the wall of worry as inflation, interest rate, consumer and geopolitical risks dominate the news. Lower future interest rates should also help earnings growth in small-cap and value stocks.


2024 JWS Prediction


  • Leadership transition from large cap stocks to small/mid cap stocks; timing based on yields
  • Mag 8 becomes Lag 8 while market participation broadens.
  • Global stocks may begin to rally if the global economy begins to accelerate.

Fixed Income

  • High credit, long duration, fixed rate to outperform.
  • Stable to lower yields should be expected across the maturity curve as short-term yields drop

relative to long-term yields.

Real Assets

  • Commodities may begin to offer better returns once global economy begins to accelerate.
  • Real Estate may begin to outperform if long-term yields continue to drop.

GDP Growth

  • GDP growth is expected to slow mid year and reaccelerate in fourth quarter as the Fed begins to ease monetary policy.


  • Inflation continues to slow to the Fed range of 2% - 3%. It may be a bumpy ride if the labor

market continues to be tight.

Interest Rates

  • The Fed may begin to lower short-term interest rates by year end. Quantitative tightening will continue into 2025.


  • Russia/Ukraine war heats up with calls for increased NATO support.
  • Iran/Israel conflict grows as proxies continue hostilities. Gaza stabilizes.
  • North Korea continues its aggressive posture towards South Korea and Japan.
  • Global relations always has a potential for conflicts which have not yet begun.


JWS Positioning


  • Capitalization: Overweight small- and mid-cap relative to S&P 500
  • Domestic v. International: Overweight domestic US versus global and emerging market equities relative to MSCI All Country Index
  • Style: Neutral
  • Tactical Positions:
    • Overweight small- and mid-cap stocks
    • Overweight second tier large-cap stocks

Fixed Income

  • Credit Quality: High
  • Duration: Neutral
  • Coupons: Fixed rate
  • Tactical Positions: None

Real Assets

  • Commodities: Overweight uranium miners
  • Real Estate: Neutral