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Market Headlines 👀 

• Microsoft (MSFT) announces it will be building a brand new AI hub in London.

• US 10y bonds hit a 2024 high, as rate cut expectations decrease and we have inflation data coming Wednesday.

• Tesla (TSLA) Musk says Robotaxi will be unveiled on August 8th later this year.

• JP Morgan (JPM) company CEO Jamie Dimon shares his latest thoughts on the markets and more in his annual letter.

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Recap Around the Street 🧠

• Economy: We expect broad U.S. economic data to remain resilient in the second quarter.  There are signs of incremental strength in the economy, such as in manufacturing, while also signs of incremental weakness, such as in peripheral labor data (job openings, hours worked, etc.).  After a large increase in 2024 GDP estimates (from 1.2% to 2.2% over the course of the first quarter), we do not see as much upside to GDP estimates from here.  We are watching for signs of continued inflation stickiness that have emerged in recent months, keeping a close on commodity markets.

• Fed: If data resilience continues, we expect the Fed and the bond market to continue to moderate rate cut expectations for 2024, as we see 1-2 cuts maximum in a robust growth environment (but continue to note that in the last 40 years, the Fed has never started a rate cutting cycle when manufacturing Purchasing Managers Indices were rebounding, as they are currently).

• Fixed Income: We expect continued upward pressure on yields from stronger economic data, stickier inflation, the prospect of a tighter Fed, and, potentially, Treasury supply dynamics.  Higher long yields can eventually present buying opportunities.  We watch for deterioration in economic data to be the source of yield downside.  In credit, strong economic growth keeps credit fundamentals solid, but note that given how tight credit spreads are, along with increased issuance, any weakness in growth outlooks could cause brisk spread widening. 

• Equities: We expect the second quarter to be marked by higher volatility compared to the first quarter’s ultra-low volatility rally.  High multiples, crowded positioning, and ebullient sentiment can be tolerated by markets as long as growth forecasts continue to rise and liquidity stays abundant.  However, if growth estimates are trimmed or liquidity recedes, we could see a bout of volatility that can be used as an entry point for underweight investors.  We expect the rotations that began in late 1Q24 to continue into 2Q24 (which has been led by cyclical Value sectors like Energy, Materials, Industrials, and Financials).  We watch the Technology sector closely, as its continued strength is critical for the overall market given its large weight in the index (meaning Tech can lag, but it cannot be weak for overall market returns).

For much, much more detail, please click here for our complete analysis of the second quarter macro and market environment.

(Contributed by Cameron Dawson, CIO at NewEdge Wealth).

Market Preview 🎞️

• Tuesday, April 9th: NFIB small business optimism

• Wednesday, April 10th: MBA mortgage applications; Consumer price index (CPI); wholesale inventories; last Fed meeting minutes

• Thursday, April 11th: Weekly jobless claims; Producer price index (PPI)

• Friday, April 12th: University of Michigan, sentiment and inflation expectations

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That’s all for today, folks! We’ll be back around the same time Thursday with a curated list of important news, economic data and market highlights. 

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