April Market Roundup: First Down Month of 2024, Inflation Above Expectations

April was the first negative month of the year, posting a -4.16% decline, solidly below its historical average of +1.3% (med +0.9%).

Still, the April pullback is consistent with the historical path of a bull market in an election year.

May has historically been the 2ndweakest month of the year on average at -0.1% but median return has been +0.8%

In the 96 Mays since 1928, 57 have been up and 39 have been down (aka May is up 59.4% of the time).

When May is up, it’s up +3.02% and when it’s down, it’s down -4.68%.

Yields moved higher in April, pushed by hotter-than-expected inflation numbers.

The 10yr went from 4.33% to 4.68%. 2yr went from 4.63% to 5.04%. The 3mo went from 5.37% to 5.40%.

The 2yr yield above 5% implies 1 rate cut of 25bps in the Fed Funds Rate over the next 12 months (remember that coming into the year, 5-6 cuts were being priced in by markets).

The 10yr-3mo spread, which inverted in Oct 2022, has narrowed to -0.77%, the least negative since Oct 31 2023.

Speaking of inflation, Core PCE rose +0.32% m/m in March, slowing to +2.82% y/y, above forecasts for a 2.7% figure but still the slowest since March 2021!

Headline CPI came in above forecasts at +0.38% m/m vs +0.3% expected and accelerated to +3.48% y/y.

Core CPI also came in above forecasts at +0.36% m/m and ticked up to +3.80% y/y.

The Q1 2024 GDP reading came in solidly below forecasts at +1.6% vs estimates for a 2.5% reading.

Real Core PCE jumped +3.73%, which will continue the “inflation is back” rhetoric – that’s the biggest q/q gain since Q1 2023 and above forecasts for a 3.4% reading.

But the 4q rolling average slowed to +2.87%, smallest gain since Q1 2021 – the trend is your friend.

The Q 2024 reading for the Employment Cost Index for All Civilian Workers came in at +1.17% q/q, above forecasts for a +0.9% reading

This figure is being read as inflationary as it means businesses/employers are paying their workers more.

It is worth mentioning that this figure was boosted by large union contract settlements a year ago.

The headline ECI for union and nonunion workers rose 5.3% and 3.9% Y/Y. Wages and salaries rose 6.3% and 4.1% Y/Y for union and nonunion workers over the same period.

However, union members accounted for only 6.0% of private employment in 2023.

Manufacturing is starting to climb out of recession. The 5 regional Fed surveys in the US remain on tenuous footing but are starting to move higher on the current activity side…

Here are the future manufacturing surveys, more positive than the current activity surveys.

Sentiment turned more bearish with the drawdown in the S&P 500.

The CNN Fear & Greed Index started the month at 73 and finished at 41. Crypto F&G held in a bit better going from 79 to 67.

Bitcoin went from $70,380 top $60,040, a decline of -14.7% in April…

AAII sentiment has seen the bulls pull back to 32.1, lowest since October 30 2023.

NAAIM investor exposure to US equity markets is down to 59.5, lowest since Jan 17 2024.

UMich consumer sentiment pulled back in April (this is closely tied to inflation, so that’s likely the reason it ticked lower).

The Conference Board Consumer Confidence reading for April fell to 97.0, the lowest since July 2022.

The Present Situation Index declined to 142.9 and the Expectations Index fell to 66.4, the lowest since July 2022 as well.

Oil inventories have been building in the last several weeks, but the SPR still remains near multi-decade lows. Still, you gotta start somewhere…

On a y/y basis, Total Crude Inventories, SPR, and ex-SPR are all positive for the first time since March/April 2021!

Brent and WTI Crude both hit multi-month highs earlier in April before retreating in the 2nd half of the month.

Volatility remains fairly subdued, but trended a bit higher in April with the S&P 500 drawdown…

Performance derbies: