The Stock Market Is Running Low on Inspiration

by Jonathan Levin of Bloomberg News, 3/15/24

All durable bull markets need bouts of positivity to keep them moving higher, and the next month is shaping up to be a good-news desert.

First, consider the outlook in Monetary Policy Land. Interest rate cuts that seemed inevitable a few months back have evidently been delayed, perhaps until mid-summer. Although I’m an avowed inflation optimist over the medium-term, the market has just digested two consecutive consumer price index reports in which monthly core inflation came in above expectations. Yes, start-of-year excess seasonality was probably a factor in the noisy numbers, but that could bleed into March as well.

There’s little reason then for Fed Chair Jerome Powell to encourage talk of an imminent easing once policymakers meet later this month, and some risk that his language prompts traders to price in an even later first cut. A third strike on the inflation front would also push market narratives in a much more hawkish direction: Some traders would scrap 2024 rate-cut bets altogether, and warnings of additional hikes would proliferate in the financial media.

Next, there’s the earnings outlook. Artificial intelligence superstars Nvidia Corp. and Microsoft Corp. clearly have momentum on their side, but investors will have to wait until their next quarterly reports in late April and May for another shot of their hopes-and-dreams medicine. Of course, investors will hear from Chief Executive Officer Jensen Huang at the annual Nvidia GTC artificial intelligence conference starting on March 18, but history shows that the event is rarely the stock-market catalyst that its quarterly earnings guidance has become.

The stock’s median one-month return from the start of the conference is about 2.8%, which is actually below normal for a stock that has compounded at about 3.3% a month since 2009.

Is Nvidia GTC a Catalyst