Market Quote: S&P 500 Reaches New Heights, U.S. Regional Bank Guidance, U.S. Consumer Resilience
Author: The editor's desk
January 24, 2024
A mid-week analysis of what’s happening in global financial markets from the perspective of AGF’s investment management team.
Artificial High
The S&P 500 is trading at new all-time highs after exceeding late last week its previous high-water mark set in early January of 2022. Yet, crucially, 77% of S&P 500 companies still trade below their January 2022 levels as the trend towards substantial S&P gains being concentrated in companies associated with generative artificial intelligence (AI) continues.
The world’s leading semiconductor manufacturer, responsible for more than 90% of advanced chip production, issued a robust 2024 outlook, signaling a shift in semiconductor end-markets. Accelerated AI investment in 2024 could yield productivity improvements in 2025 and beyond, potentially following Amara’s Law, which suggests the market tends to overestimate short-term technology potential but underestimates long-term impact.
Not So Clear Cut
Some U.S. regional bank stocks traded lower following the release this past week of fourth quarter earnings and guidance that suggests the group may experience more muted loan and deposit growth over the next two quarters.
This is especially true if the U.S. economy struggles before picking up towards the end of the year. Yet part of this guidance is also based on rate cut assumptions for 2024. In fact, most of the “regionals” have adopted current market estimates that are calling for six rate cuts over the course of the next year.
But what if the U.S. Federal Reserve ends up cutting less than that (and more in line with its own projections of three cuts)? In that case, the revenue picture for U.S. regional banks could end up improving materially, all other things being equal.
Data Dependent
The recent release of the December retail sales in the U.S. exceeded market expectations. That event, coupled with a resilient University of Michigan Survey, revived the upward pressure on U.S. Treasury rates we have observed since the beginning of 2024.
This could change rapidly with all eyes now on the latest consumer spending numbers scheduled for release on Friday morning. This will be one of the last meaningful data points the market is expecting before the U.S. Federal Reserve’s meeting planned for next Wednesday and could therefore have a huge impact on current trends.
For full bios, please visit our contributor’s page.
The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds, or investment strategies.
Commentary and data sourced from Bloomberg, Reuters and other news sources unless otherwise noted. The commentaries contained herein are provided as a general source of information based on information available as of January 23, 2024 and are not intended to be comprehensive investment advice applicable to the circumstances of the individual. Every effort has been made to ensure accuracy in these commentaries at the time of publication, however, accuracy cannot be guaranteed. Market conditions may change and AGF Investments accepts no responsibility for individual investment decisions arising from the use or reliance on the information contained here.
This document may contain forward-looking information that reflects our current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein.
For Canadian investors: Commissions, trailing commissions, management fees and expenses all may be associated with investment fund investments. Please read the prospectus before investing. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The term AGF Investments may refer to one or more of these subsidiaries or to all of them jointly. This term is used for convenience and does not precisely describe any of the separate companies, each of which manages its own affairs. AGF Investments entities only provide investment advisory services or offers investment funds in the jurisdiction where such firm, individuals and/or product is registered or authorized to provide such services.
® ™ The “AGF” logo and all associated trademarks are registered trademarks or trademarks of AGF Management Limited and used under licence.
RO:20240124-3348106
About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. Our companies deliver excellence in investing in the public and private markets through three business lines: AGF Investments, AGF Capital Partners and AGF Private Wealth.
AGF brings a disciplined approach, focused on incorporating sound, responsible and sustainable corporate practices. The firm’s collective investment expertise, driven by its fundamental, quantitative and private investing capabilities, extends globally to a wide range of clients, from financial advisors and their clients to high-net worth and institutional investors including pension plans, corporate plans, sovereign wealth funds, endowments and foundations.
Headquartered in Toronto, Canada, AGF has investment operations and client servicing teams on the ground in North America and Europe. AGF serves more than 800,000 investors. AGF trades on the Toronto Stock Exchange under the symbol AGF.B.
For further information, please visit AGF.com.
© 2024 AGF Management Limited. All rights reserved.
