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April Fools & Outliers

If you are like me, April 1st brings at least one news headline that catches me off guard before that first cup of coffee, forgetting that it is April Fool’s Day. A ‘got me’ moment. These moments create a good laugh and brings me back to simpler days before these April Fool's jokes were ruled by news headlines on my phone, but rather a simple joke between friends. Just another way that technology and connectivity has changed the most minute things. We all must stay on our toes.

For the first quarter of 2024 the market's ride continued its upward path. Then, April Fool's Day came, and we spent the week being teased by a few dips in what has been a very resilient market. Friday ended the day on a high note but left us with a rare negative week.

In times of uncertainty (which is the majority of the year) we always look back at history as a guide. Many investors and analysts look at how the start of the year can set the stage for the rest of the year. Historically, we see that a strong start to the first quarter of the year of +10% returns in the S&P 500 has resulted in very good outcomes for equity markets over the full calendar year ahead. The only outlier here is 1987 where we had the infamous 87' crash. Better known as an outlier. The other years produced double digit returns. Very intriguing statistics.

I enjoy data like this as it emphasizes how a true outlier must occur to change a historical trend. The kind of outlier we work diligently to prepare for via asset allocation and risk management.

In the midst of the Fed's recent report stating higher than expected jobs numbers, lower unemployment (3.8% from 3.9%), stabilized inflation, and the possibility of the Fed not being in such a hurry to lower interest rates, we see that wage growth has also slowed. To workers, slowing wage growth could be seen as a negative. For the economy and the Fed, slower wage growth highlights even more evidence that inflation is stabilizing. Can we continue this progress? Time will tell.

Comedian Jerry Seinfeld once said, “the only way to know where the top is, is to experience the decline.” Given the economic data we continue to see, company earnings, and the massive opportunities that AI tech could bring, this being the top does not seem imminent. But we must always keep an eye on those outliers.

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