Cracked Circuits and Bumpy Roads

Last week saw a reversal of the pain US Equities have been feeling, with a much-wanted mid-earnings-season rebound. The rebound was driven by Tech and mega-caps showing some strong earnings reports and a blended earnings growth rate in line with expectations. As we move into the month end and the second half of earnings season, the question becomes whether or not there is enough fuel to keep going?

One potential fuel source is last week’s much-anticipated FTC non-compete rule released and passed on a partisan line vote. The rule was broader than many anticipated, effectively eliminating non-competes for entities under the FTC’s jurisdiction except for current non-competes for company executives. Going forward, no new non-competes can be inked, and companies must notify current and former workers impacted by non-competes that are invalidated. Of note, the department indicated the rule will apply to any company, even non-profits (like some hospitals) that primarily bring revenue to their stakeholders, even if not generating profit; the department specifically called out the applicability of the rule to doctors. As anticipated, the rule was immediately challenged in court by the US Chamber of Commerce to block the rule on grounds it exceeds the authority of the FTC.

Weekly Performance

Data Source: Factset®        Performance Period:      4/22/2024    4/26/2024

Last week saw Q1 GDP1 print below expectations. With quarter-over-quarter growth of just 1.6%, GDP fell from 3.4% in Q4 2023 and missed expectations for growth of 2.2%. PCE2, the preferred metric of inflation for the Federal Reserve and the one used for the FOMC’s explicit target of 2% inflation, came in just above expectations with Core PCE Deflator at 2.8% and Headline PCE deflator 2.7%. Neither of these, although both above the target of 2% inflation, would be as concerning if Personal Income3 and Personal Consumption Expenditure3 weren’t also painting a troubling picture. PCE printed at 0.8%, and Personal Income printed at 0.5%, which show consumer spending growth is outpacing income growth. This has been a trend for some time now and incredibly difficult to sustain without additional debt. Overall, we see a picture of income and growth falling short of inflation, while expenses will continue to strain consumers.

As we sail into month end, primary elections, non-competes, and inflation have the markets blowing in all directions. With much of this wind being driven by self-interest, it is our prayer that the eventual market trajectory will be shaped by humility and uplifting those outside ourselves. “Do nothing from selfish ambition or conceit, but in humility count others more significant than yourselves. Let each of you look not only to his own interests, but also to the interests of others” (Philippians 2:3-4). We’ll be ready to chart our course, accordingly.

1. Seasonally Adjusted Annualized Rate
2. Seasonally Adjusted, Year over Year
3. Seasonally Adjusted, Month over Month

Sources: Yahoo Finance, Reuters.com, and JP Morgan Market Insights

 Sources: Yahoo Finance, Reuters.com, and JP Morgan Market Insights. Securities offered through American Portfolios Financial Services, Inc. of Holbrook, New York, 631.439.4600,(APFS), member FINRA, SIPC.  Faithward Advisors is not owned or operated by APFS. Faithward Advisors offers Investment Advisory services through Ambassador Advisors, an SEC Registered Investment Advisor. Dream More, Plan More, Do More is a registered trademark of Faithward Advisors, LLC, Reg. U.S. Pat. & Tm. Off. Any opinions expressed in this forum are not the opinion or view of Faithward Advisors or American Portfolios Financial Services, Inc. (APFS). They have not been reviewed by either firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.