Weekly Market Commentary

April 22nd, 2024

The Markets

Investors have been recalibrating their expectations.

There is a lot going on in the world that could affect the value of financial markets – wars, tensions between major powers, a strong dollar, and rising oil prices – just to name a few. Last week, it was Federal Reserve policy. The possibility that the Fed might keep rates higher for longer shook investors, reported Naomi Rovnick of Reuters.

At a policy forum early in the week, Fed Chair Jerome Powell told the audience:

“The performance of the U.S. economy over the past year has really been quite strong. We had growth of more than three percent last year as rebounding supply supported both robust growth and spending, and also employment alongside a considerable decline in inflation. More recent data show solid growth and continued strength in the labor market but also a lack of further progress so far this year on returning to our two percent inflation goal…we’ll need greater confidence that inflation is moving sustainably toward two percent before it would be appropriate to ease policy.”

With the federal funds rate likely to remain at its current level for longer than expected, markets reconsidered how that might affect economic growth and corporate earnings, reported Jacob Sonenshine of Barron’s.

“Big investors are not rushing to change long-term holdings, but in a sign of things to come, stock market volatility is around a six-month peak as traders debate how high the U.S. rate…against which financial assets are valued will stay,” reported Rovnick.

The Standard & Poor’s 500 Index moved lower over the week as investors sold technology stocks on fears that first-quarter earnings reports might disappoint, reported Rita Nazareth of Bloomberg. The Nasdaq Composite and Dow Jones Industrial Average moved lower, too, while yields on many maturities of U.S. Treasuries moved higher.

Data as of 4/19/24	1-Week	YTD	1-Year	3-Year	5-Year	10-Year
Standard & Poor’s 500 Index	-3.1%	4.1%	19.6%	6.1%	11.3%	10.3%
Dow Jones Global ex-U.S. Index	-2.6	-0.5	4.0	-3.5	2.1	1.5
10-year Treasury Note (yield only)	4.6	N/A	3.6	1.6	2.6	2.7
Gold (per ounce)	-1.0	14.5	19.6	10.3	13.4	6.3
Bloomberg Commodity Index	0.1	4.5	-4.0	5.9	3.5	-2.9

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

CHIEF EXECUTIVE OFFICER (CEO) PAY INCREASED. It’s not an economic indicator, but the compensation companies pay CEOs affects employee, customer, and public perceptions.

“Pay is critical for attracting, retaining, and motivating a CEO, and affects the wider company beyond the CEO – high pay may demotivate employees or damage a company’s customer reputation. Even more broadly, CEO pay across the economy influences the public’s perception of capitalism,” explained researchers Alex Edmans, Tom Gosling, and Dirk Jenter in the Journal of Financial Economics.

Last year, median annual pay for America’s CEOs hit a new record: $23.7 million, an 11.4 percent increase from the prior year, reported Andy Serwer and Angela Palumbo of Barron’s. “Median pay for CEOs in this group is now a record 300 times that of their median employee’s, compared with a ratio of 255 in 2018,” reported Serwer and Palumbo.

Serwer and Palumbo cited data from an analysis of the largest pay packages for CEOs at U.S. public companies with revenues of $1 billion or more. (Median is the number in the middle, not the average.) CEO pay at the companies measured ranged from about $162 million to about $19 million in 2023.

So, how does the increase in CEO pay stack up? It was:

Higher than inflation, which was up 3.4 percent in 2023.
Higher than wage and salary increases for union workers, which averaged 5.4 percent.
Higher than wage and salary gains for non-union workers, which averaged 4.2 percent.
Higher than benefits cost increases, which averaged 3.6 percent.

Median annual pay for U.S. workers was about $58,000 in 2023, according to Eric Van Nostrand, Laura Feiveson, and Tara Sinclair of the U.S. Treasury Department.

“Before anyone feels compelled to storm the barricades, it’s worth noting that the 11.4% gain in CEO pay is less than the 13.8% total return to shareholders produced by these companies last year. In fact, CEO pay for top companies climbed 8.77% on average annually over the past six years, while the total annual average return for these companies was 12.02%.” reported Serwer and Palumbo.

Weekly Focus – Think About It

“I have been struck again and again by how important measurement is to improving the human condition.”

—Bill Gates, businessman and philanthropist

Best regards,

Loreen Gilbert, CIMA®, AIF®, CRC®

Founder and CEO

loreeng@wealthwisefinancial.com

John Milligan, CFA®

Director of Investment Strategy

johnm@wealthwisefinancial.com

Sources:

https://www.reuters.com/markets/rates-bonds/global-markets-interest-rates-analysis-pix-2024-04-17/