Economic Data: A Reminder that it can be like a ‘full-on Monet’

Stocks soared to new record highs last week, with the S&P 500 hitting an intraday high of 5,264.85 and a closing high of 5,254.35 on Thursday. The index increased by 0.4% for the week, bringing its year-to-date gains to 10.2% and its increase from the October 2022 closing low to 46.9%.

While the markets reached new highs, investors were reminded of the volatility and noise that can come with short-term data and price movements. Federal Reserve Chair Jerome Powell cautioned against drawing big conclusions from one month’s worth of data, emphasizing the importance of managing risk and being open to shifting narratives.

One area of concern has been the rise in subprime loan delinquencies, with some reports showing rates above pre-pandemic levels. However, analysts from Morgan Stanley and the Federal Reserve have highlighted the impact of credit score migration on these delinquency rates, suggesting that the situation may not be as dire as it seems.

Despite these concerns, strategists like John Stoltzfus from Oppenheimer and Lori Calvasina from RBC have raised their year-end targets for the S&P 500, citing strong earnings results, economic resilience, and prospects for innovation.

Overall, the macroeconomic landscape continues to show signs of a bullish “Goldilocks” scenario, with inflation cooling to manageable levels and consumers and businesses in strong financial positions. While risks of a recession remain elevated, long-term investors are encouraged to stay the course and focus on the positive long-run outlook for stocks.