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Canby Financial Advisors Market Commentary for the Quarter Ending 3/31/2024

Canby Financial Advisors Market Commentary for the Quarter Ending 3/31/2024

April 11, 2024

Investment markets continue to be driven in large part by changing expectations for interest rates.  Stocks and bonds both moved higher in late 2023 when the US Federal Reserve Bank indicated they were pausing further interest rate hikes.  While most economists assume the next change in the Fed Funds rate will be a 0.25% reduction, investors anxiously monitor inflation reports for signs that price increases for goods and services are falling back toward the Fed’s 2% inflation target.

Forecasting the direction of interest rates has always been one of the most challenging economic predictions.  The Fed has a dual mandate – full Employment and stable Inflation.  If the job market is weak, the Fed can reduce interest rates to spur more hiring.  If inflation is above their 2% target, the Fed will keep interest rates high to control inflationary spending.  The job market has remained strong as we continue to recover from the global pandemic.  Inflation has declined over the past year, but recent reports show it remains above the Federal Reserve’s target and further declines in inflation are uncertain.

Heading into 2024, market expectations were that the Fed would start to reduce the Fed Funds rate in the second quarter of 2024.  Bond prices move inversely to interest rate changes.  Many investors increased their allocation to bonds to benefit from predicted lower interest rates.  Unfortunately, in the first quarter of 2024, inflation remained elevated and interest rates moved slightly higher.  The predicted gains for bond investors have not yet materialized.  The good news is that while we wait for possible lower rates to boost bond values, bond owners are being paid reasonable interest compared to the record-low rates experienced for more than a decade after the 2008 financial crisis.

Stock prices, on the other hand, continued to rise in the first quarter of 2024.  In fact, many stock indexes reached new all-time highs in recent weeks despite current interest rates.  Stocks are benefitting from stronger economic growth than economists expected.  While Artificial Intelligence has been a driver for many technology companies, earnings growth across a range of industries has helped to push a broad swath of companies’ stock prices higher. 

Continued economic growth and a strong job market may combine to keep interest rates at current levels for longer than many expect.  While consumers with low debt and fixed mortgages locked in at low rates may not feel the impact of current high rates, today’s interest rates are a challenge for many consumers and small businesses who need to borrow money to reach their goals.  The US economy has shown remarkable resilience in recent months.  Lower interest rates would be a welcome sign for future economic growth and investment gains.

The uncertain direction of interest rate changes is always a concern for investors.  While we expect rates will decline over the next two years, that is not a given.  Long-term investors are prudent to maintain a diversified portfolio of stocks and bonds. 

This article was authored by Christopher Borden. Christopher is a financial advisor and Managing Partner located at Canby Financial Advisors, 161 Worcester Road, Framingham, MA 01701. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 508.598.1082 or

Disclosure: Certain sections of this commentary contain forward-looking statements based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets. Investments are subject to risk, including the loss of principal. Because investment return and principal value fluctuate, shares may be worth more or less than their original value. Some investments are not suitable for all investors, and there is no guarantee that any investing goal will be met. This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. 

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