Weekly Update | March 22, 2024

The very big picture (a historical perspective): The CAPE is now at 35.00 – UP this week 2.28% from last week’s value of 34.22

The long-term valuation of the market is commonly measured by the Cyclically Adjusted Price to Earnings ratio, or “CAPE”, which smooths-out shorter-term earnings swings in order to get a longer-term assessment of market valuation. In the past, the CAPE ratio has proved its importance in identifying potential bubbles and market crashes. An extremely high CAPE ratio means that a company’s stock price is substantially higher than the company’s earnings would indicate and, therefore, overvalued. It is generally expected that the market will eventually correct the company’s stock price by pushing it down to its true value. The historical average of the ratio for the S&P 500 Index is between 15-16, while the highest levels of the ratio have exceeded 30. The record-high levels occurred three times in the history of the U.S. financial markets. The first was in 1929 before the Wall Street crash that signaled the start of the Great Depression. The second was in the late 1990s before the Dotcom Crash, and the third came in 2007 before the 2007-2008 Financial Crisis.


Note:  We do not use CAPE as an official input into our methods. However, we think history serves as a guide and that it’s good to know where we are on the historic continuum.

The big picture: The ‘big picture’ is the (typically) years-long timeframe, the same timeframe in which Cyclical Bulls and Bears operate. The Sherman Portfolios DELTA-V Indicator measuring the Bull/Bear cycle finished the week in BULL status at 79.49 UP 1.77% from the prior week’s 78.11. We’ve been in a cyclical bull Market since April 21, 2023.

The complete picture (four indicators across three timeframes): When all four of the Sherman Portfolios indicators are in a POSITIVE status, we read the market as being in a CYCLICAL BULL MARKET.

1. DELTA-V — Positive
3. STARFLUX— Positive
4. STARPATH — Positive

In the markets:

U.S. Markets: Stocks moved higher for the week, pushing the S&P 500 Index and the Nasdaq Composite to new records, as investors welcomed news that Federal Reserve policymakers were still anticipating three interest rate cuts later in the year. Communication services led the gains along with technology shares. A late rise helped artificial intelligence chipmaker NVIDIA reach a record high on Friday and lift the company’s market capitalization near USD 2.4 trillion. Reports that Apple might partner with Google parent Alphabet in offering generative artificial intelligence tools also boosted sentiment. Health care and real estate shares lagged. Trading the following week was scheduled to end on Thursday in observance of the Good Friday holiday.

Looking at the Indexes: The indexes had a stellar across the board with lots of positive momentum. The below 5 indexes all gained over 1% week over week, with the NASDAQ and midcap leading the group.

The Dow Jones Industrial Average gained 1.97% making up plenty of the recent downward moves, ending the week of Mar 22 at 39,475.90 vs the prior week of 38,714.77. The tech-driven NASDAQ index was a growth leader this week, with impressive single-week gains of 2.85% and closing at 16,428.82. The large-cap S&P 500 gained 2.29%, closing at 5,234.18 vs last week’s close of 5,117.09. S&P 400 mid cap gained 2.31%, closing at 2,991.26 vs its close last week of 2,923.76. The Russell 2000 (small cap) bounced back after 2 weeks of downward momentum to see gains this week of 1.60%, closing at 2,072.00 over last week’s close of 2,039.32.

Commodities/Futures: In futures, all but Gold saw declines this week with Silver and Copper leading the way in downward momentum. GOLD (GC00) ended the week at $2,166.50 per ounce vs the prior week of $2,159.40, proving a modest growth of 0.33% at market close this week. SILVER (SI00) ended its growth streak, declining by 2.26% to a close of $24.84 per ounce over last weeks close of $25.41. COPPER (HG00), after an impressive growth last week, copper took a slight dive this week, dropping 3.16% over the prior week from $4.12 to end this week at $3.99 per pound. CRUDE OIL (CL-1) ended the week at $80.01 per barrel — down a full dollar, a decrease of 0.25% over last weeks close of $81.01. VIX closed at 13.06 this week, a 9.37% decrease over last week’s close of 14.41. This can be an be an indication that there may be less demand and options prices can start to decline.

International Markets:

GLOBAL EXCHANGE/index week CLOSE % change WEEK   % change ytd
CANADA – TSX 21,984.08 UP 0.62% UP 5.33%
UK – FTSE 100 7,930.92 UP 2.63% UP 2.71%
FRANCE – CAC 40 8,151.92 DOWN 0.17% UP 8.25%
GERMANY – DAX 18,205.94 UP 1.50% UP 8.57%
CHINA – SHANGHAI COMP. 3,048.03 DOWN 0.22% UP 2.90%
JAPAN – NIKKEI 225 338,707.64 UP 5.63% UP 22.83%
MSCI Emerging Markets Index 1,039.32 UP 0.44% UP 1.43%


U.S. Economic News: The week’s main driver of sentiment appeared to be the Fed’s policy meeting concluding on Wednesday. As was widely anticipated, policymakers left the federal funds rate unchanged, but traders noted that investors seemed to take heart from the quarterly release of the Fed’s Summary of Economic Projections, which summarizes the outlook of individual committee members. The so-called dot plot showed that the median expectation for three rate cuts in 2024 remain unchanged, while the median expectations for interest rates in 2025 and 2026 went up by less than 25 basis points (0.25 percentage points), or by less than one cut.

Investors also appeared encouraged by Fed Chair Jerome Powell’s post-meeting press conference, where he indicated that he was not overly concerned about the uptick in inflation data in January and February, chalking it up to seasonal noise. Powell also pushed back against worries over potential signs of cracks in the labor market, such as the unexpected increase in the unemployment rate in February.

HOME SALES JUMP UNEXPECTEDLY IN FEBRUARY. The week’s economic data arguably supported hopes that the economy was continuing to expand without reigniting inflation pressures. Most notable may have been February existing home sales, reported Thursday, which surprised most observers by jumping 9.5%. A gauge of current manufacturing in the Mid-Atlantic region fell back a bit from February’s reading but surprised investors by indicating a second consecutive month of expansion. Encouragingly, prices paid by businesses in the region fell back to their lowest level since May 2020.

The news from the Federal Reserve helped drive a decline in longer-term Treasury yields over the week. (Bond prices and yields move in opposite directions.) According to traders, a softer tone prevailed in the tax-exempt municipal bond market as weakness among high-grade new issues appeared to carry over to the secondary market. Primary issuance ticked upward on Tuesday before becoming nonexistent after the Fed’s meeting. Our traders noted that investment-grade municipal deals generally struggled while high yield municipal deals performed well, partly as a result of the lower issuance volume within the high yield space and healthy demand for high yield municipal bonds from institutional buyers.

DEMAND REMAINS HEALTHY FOR CORPORATE PAPER. Issuance in the investment-grade market was largely oversubscribed during the week, and high yield issues were also met with solid demand. Meanwhile, there was strong demand in the secondary loan market from managers of collateralized loan obligations.

International Economic News: In local currency terms, the pan-European STOXX Europe 600 Index ended near a record high, climbing 1.03%. Dovish signals from central banks boosted risk-on sentiment. Germany’s DAX gained 1.58%, while Italy’s FTSE MIB advanced 1.30%. France’s CAC 40 Index, however, fell 0.17%. The UK’s FTSE 100 surged 2.70%.

European government bond yields declined on a weak purchasing managers’ survey for Germany and a reduction in Swiss interest rates. In the UK, bond yields fell after the Bank of England (BoE) struck a peaceful note at its policy meeting.

BOE KEEPS THE PEACE WITH RATES ON HOLD. The BoE kept its key interest rate unchanged at 5.25% for a fifth consecutive time, although the 8–1 vote in favor appeared to send a more neutral signal. Two previously hawkish policymakers dropped their calls for a hike in borrowing costs; another backed an immediate cut. Governor Andrew Bailey said: “We are not yet at the point where we can cut interest rates, but things are moving in the right direction.” Later, in newspaper interviews, Bailey signaled greater optimism about the economy and told the Financial Times that rate cuts could be “in play” at future meetings.

SNB UNEXPECTEDLY CUTS RATES; NORWAY’S CENTRAL BANK STAYS PUT. The Swiss National Bank (SNB) unexpectedly reduced borrowing costs by a quarter of a percentage point to 1.5% — the first cut in nine years. The SNB said that it aimed to address lower inflationary pressure and an appreciation of the Swiss franc. Meanwhile, Norway’s central bank kept its policy rate unchanged at 4.5%.

EUROZONE BUSINESS ACTIVITY PICKS UP. PMI surveys showed that the output of goods and services in the eurozone came close to stabilizing in March, with a first estimate recording only a marginal decline, S&P Global said. The eurozone composite PMI rose to a nine-month high of 49.9 from 49.2 in February. (PMI readings above 50 indicate an expansion in activity.)

JAPAN: Japanese equities gained over the week primarily on yen weakness resulting from the Bank of Japan’s unexpectedly hawkish tilt (it raised interest rates earlier than had been priced in by most market participants and for the first time since 2007). The Nikkei 225 Index rose 5.6%, and the broader TOPIX Index was up 5.3%, with both indexes rallying to record-high levels. Sentiment was also supported by expectations that the U.S. Federal Reserve will cut interest rates in 2024, given the state of inflationary conditions and the economy’s growth prospects.

CENTRAL BANK ENDS NEGATIVE INTEREST RATE POLICY. Japanese government bond yields moved lower after the Bank of Japan (BoJ) made a much-anticipated policy shift and exited its negative interest rate policy. The central bank announced that it will set a policy rate target of 0 to 0.1%, up from -0.1%, following reports from the previous week of major companies agreeing to robust pay increases in annual wage talks. The BoJ also ended its yield curve control program. However, Governor Kazuo Ueda affirmed that financial conditions would remain accommodative as inflation expectations were still below the 2% target.

CONSUMER PRICES PICK UP. On the Japanese economic data front, consumer price inflation, as measured by the consumer price index (CPI), rose to a higher-than-anticipated 2.8% annualized over the month of February. This was a sharp pickup from January’s 2.0% and well ahead of the BoJ’s inflation target.

CHINA: Chinese equities retreated as concerns about the property sector slump offset optimism about better-than-expected economic data. The Shanghai Composite Index declined 0.22%, while the blue chip CSI 300 gave up 0.70%. In Hong Kong, the benchmark Hang Seng Index lost 1.32%, according to FactSet.

Property investment in China fell by 9% in the January–February period from a year earlier, slowing from a 24% drop in December, according to official data. Property sales by floor area sank 20.5% in the first two months of the year, after slumping 23% in December. The slower pace of declines in property investment and sales came after Beijing rolled out numerous pro-growth measures to arrest the country’ yearslong real estate slump. However, most investors remain cautious about China’s property sector as developers continue to grapple with high debt levels and weak homebuyer demand.

Other data showed that some parts of China’s economy were picking up. Industrial production rose an above-forecast 7% in January and February from a year earlier, up from December’s 6.8%. Fixed-asset investment grew 4.2% in the first two months of the year from the prior-year period, rising from 3% in December amid higher infrastructure growth. Retail sales rose more than expected over the two-month period as consumption surged during the weeklong Lunar New Year holiday but eased from December’s increase. The urban unemployment rate was 5.3%, while the youth jobless rate edged up to 15.3%.

In other news, Chinese banks left their one and five-year loan prime rates unchanged at 3.45% and 3.95%, respectively, as expected, after the People’s Bank of China kept its medium-term lending rate on hold the prior week. Many analysts anticipate that the central bank will continue to loosen policy and further reduce its reserve requirement ratio after a surprise cut in January to boost demand.

(Sources:  All index- and returns-data from Norgate Data and Commodity Systems Incorporated; news from Reuters, Barron’s, Wall St. Journal,,,,,,,, Eurostat, Statistics Canada, Yahoo! Finance,,,,, BBC,,,, FactSet, Morningstar/Ibbotson Associates, Corporate Finance Institute)


Brandon Haines, MBA, AIF®, CFP®
Brandon Haines, MBA, AIF®, CFP®