Welcome to the March 2024 edition of stock market trends and updates. This month,  there’s a palpable sense of uncertainty, prompting investors to adopt a cautious approach. Concerns about global economic growth and geopolitical risks continue to loom over the markets, casting a shadow of doubt. However, amidst this uncertainty, the prospect of interest rate cuts offers a glimmer of hope for the way ahead. 

Whether you’re a seasoned investor or just beginning on your financial journey, we aim to bring you valuable insights together with a deeper understanding of the current state of the global stock markets. With that being said, let’s dive into the latest news, updates, and surprises that define this March. 

Current state of the market

This momentum of the stock market rally continues to surge as investors weigh the impact of the latest economic indicators on the Federal Reserve’s impending interest rate cuts, which have been eagerly anticipated for some time.

The S&P 500 experienced a notable uptick of 5.34% in February alone, pushing its year-to-date total return to an impressive 7.11%. This surge in performance has fostered growing optimism among investors regarding the Federal Reserve’s ability to orchestrate a smooth landing for the U.S. economy.

Furthermore, fourth-quarter earnings reports have surpassed expectations, with companies demonstrating adept management of escalating costs and interest rates, which have soared to their highest levels in 22 years.

Are there interest rate cuts ahead?

The inflation, interest rates, and labour market narrative will likely continue to hold centre stage on Wall Street this March.

During the last meeting in January, the Federal Open Market Committee (FOMC) chose to maintain interest rates at the current range of 5.25% to 5.5%, the highest target range in 22 years. Economists expect the FOMC to maintain the interest rates at the current levels at the next meeting on the 20th of March. 

Minutes from the January meeting indicated that officials wouldn’t be cutting interest rates until there’s “greater confidence” in declining inflation. Furthermore, FOMC officials commented on the “risks of moving too quickly”, suggesting a tentative approach over an optimistic one. 

Senior equity strategist for the Commonwealth Financial Network, Rob Swanke predicts the first Fed rate cut might not happen until June. “The Fed minutes are showing that we’re still likely a few meetings from a rate cut,” reports Swanke. 

The direction of inflation 

In February, the Federal Reserve grappled with mixed data in its quest to ensure a gentle economic descent for the U.S. economy.

The consumer price index (CPI) registered a 3.1% year-over-year increase in January. While this marked a decline from the peak inflation of 9.1% observed in June 2022, it surpassed economists’ projections of a 2.9% uptick. Moreover, the monthly CPI figure rose by 0.3%, marking the most substantial monthly increase since September.

In tandem with the CPI surpassing expectations, the personal consumption expenditures price index (PCE) rose by 2.4% year-over-year in January, down from the 2.6% increase recorded in December.

Core PCE inflation, excluding volatile food and energy prices and serving as the Fed’s preferred inflation metric, stood at 2.8% in January. While aligning with economists’ forecasts, it still exceeded the FOMC’s long-term target of 2%.

Figures from the UK’s Office for National Statistics (ONS) reflect that higher interest rates from the Bank of England (BoE) and the rising cost of living are dampening labour market conditions. 

Meanwhile, the rate of unemployment increased to 3.9% and average earnings grew slower in the three months ending January. The unstable labour market further demonstrates uncertainty over the economy, which could force BoE policymakers to reduce interest rates sooner than expected. 

Watching the U.S. recession

According to the Labour Department, the U.S. economy added a staggering 353,000 jobs in January, surpassing economist estimates of 185,000 new jobs. This marked the first instance since June and July of 2022 that the U.S. reported consecutive months of adding over 300,000 jobs. U.S. wages saw a notable uptick of 4.5% in January compared to the previous year, while the unemployment rate remained historically low at 3.7%.

In a February interview on “60 Minutes,” Federal Reserve Chair, Jerome Powell, cautioned that the Fed’s tightening of monetary policy would inevitably inflict “some pain”. However, Powell emphasised that officials are awaiting greater confidence in their ability to control inflation before considering interest rate cuts.

With the labour market showing little signs of cooling, the FOMC faces challenges in justifying a rate cut. The longer the Fed maintains interest rates at current levels to rein in inflation, the greater the risk of economic repercussions down the line. This concern is underscored by the New York Fed’s U.S. recession probability index, which still indicates a 61.5% chance of a recession within the next 12 months.

While FOMC officials have tempered recession forecasts, the December Federal Reserve economic projections hint at a decline in U.S. GDP growth for 2024.

Geopolitical risks 

Geopolitical tensions have weighed heavy on the stock market as several global disputes have continued to simmer. However, the meeting between U.S. President Joe Biden and Chinese President Xi Jinping in mid-November gave some much-needed hope.

U.S. and China: a positive visit

Amidst the evolving dynamics between the U.S. and China, there appears to be a shift towards a more pragmatic approach. President Xi’s acknowledgement that the planet offers ample space for both nations to coexist signals a departure from aggressive diplomatic strategies. Similarly, the U.S. is embracing a perspective of competitive interdependence, recognising that while differences on crucial issues like human rights persist, cooperation is feasible in areas such as climate change and global health crises.

Although concerns about a potential new Cold War loom, historically, as with the Americans and Soviets, lines of communication were kept open. Consequently, one of the significant outcomes of the Biden-Xi meeting is the agreement to reinstate communication channels between their respective militaries, a step forward from the hiatus triggered by Pelosi’s Taiwan visit. 

Additionally, both parties have committed to combating the flow of synthetic opioid drugs from China to Mexican drug cartels, a move aimed at addressing the profound impact of these drugs, often termed “deaths of despair,” on the U.S.

Shifting geopolitical dynamics

Recent global events have spurred changes in international relations. The conflict between Hamas and Israel threatens to escalate tensions in the Middle East, prompting the U.S. to intervene to prevent further instability and convince its Arab counterparts to not put an oil embargo in place – as was the case after the Yom Kippur War. All while Ukraine fights Russia’s invasion. 

For China, economic concerns drive their approach. Despite being the world’s second-largest economy, China faces ongoing economic challenges, including high youth unemployment and a struggling real estate market. To address these issues, China aims to shift towards consumption-driven growth and innovation. However, this transition is complex and hindered by technology restrictions imposed by the U.S.

Navigating these dynamics requires a reconciliatory approach from all sides, acknowledging the shared interest in stability and economic prosperity.

Final thoughts

As we’ve explored the intricacies of the current global stock market landscape in March, it becomes clear that investors are encountering heightened uncertainties. The dynamic evolution of the markets, influenced by variables like interest rates, economic expansion, and inflation, suggests the possibility of questioning times ahead.

We are reminded that remaining vigilant and informed is our ally. As reported by MarketWatch.com, the S&P 500 futures were virtually flat after the 17th record high of the year, while the road to inflation remains bumpy .  

While the markets may experience sharp swings and uncertainties, it’s essential to remember that these dynamics are inherent to the investment landscape. Staying well-informed, maintaining a diversified portfolio, and adopting a long-term perspective can help investors weather the storm and seize opportunities that arise during these challenging times.

That’s where 4XSolutions comes in – as the industry’s leading technology provider for brokers and traders, we offer the tools and expertise you need to succeed. With a presence in the UK and the U.S., our global reach allows us to deliver high-quality services and support to forex traders worldwide. By leveraging our cutting-edge trading technology, you can copy and execute trades, manage risk, and increase profits – all while staying ahead of the curve in an unpredictable market.

So, if you’re looking to take your trading portfolio to the next level in 2024, get in touch with our expert team at 4XSolutions. We’re here to help you improve your trade and investment strategy, maximise returns, and confidently navigate market conditions.