Among the most pleasant memories of my “boomer” childhood are the Warner Brothers cartoons that played on television every Saturday morning. Our TV set had rabbit-ear antennae and only three channels. (My kid brother served as the remote control.)

Particularly beloved was Wile E. Coyote. In frantic pursuit of the Road Runner, the hapless predator would run straight off a cliff and continue to pump his legs in midair…until he glanced around, gulped, and plummeted into the canyon.

Likewise, the highly valued stock market has continued to defy gravity. But for how long?

The main U.S. stock market indices last week closed at all-time highs. Equity benchmarks in Asia and Europe also have been thriving. The Federal Reserve and its central bank counterparts around the world are loosening monetary policies, as pandemic-induced inflation diminishes.

My contention is that conditions are in place to continue fueling the global bull market throughout 2024, but along the way we’re likely to get pullbacks, perhaps even a correction (a decline of at least 10% but less than 20%).

However, I see no evidence that a coyote-magnitude plunge will ensue, unless we get a “black swan” (e.g., geopolitical catastrophe) that supersedes the fundamental and technical factors.

Valuations are high but not at dangerous nosebleeds levels. The forward 12-month price-to-earnings ratio for the S&P 500 is 20.9 (as of market close March 28), according to FactSet. That’s down from 21.5 the previous quarter and 23.9 the previous year. Historically, the typical range is 20.5 to 28.7.

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The recent broadening of the market’s gains, as reflected by the rising New York Stock Exchange Advance/Decline line (NYAD), is a sign that the bull market still has fuel in the tank. Valuations are stretched, but not for the average stock that’s outside of the technology mega-caps. What’s more, value-style investments over the past month have been outperforming growth.

Reversions to the mean would be healthy and likely followed by the next leg-up in the bull run. In the meantime, stocks last week racked up a strong first quarter (see table).

Crude oil prices closed out the holiday-shortened week at substantially higher levels, as traders bet that economic growth will stimulate energy demand. Production restrictions by OPEC+ also are driving oil prices higher, to the benefit of the energy sector. Indeed, the top performing sector in Q1 was energy, with a gain of 13.5%.

The main goal of output curbs imposed by OPEC+ is to generate more revenue for producers, of course, but the cartel also seeks to punish the West for its perceived hypocrisy on human rights, its support of Israel, and its opposition to Russia’s invasion of Ukraine.

Cartel leaders Saudi Arabia and Russia are particularly keen to shove a stick into the eye of the Biden administration, which doesn’t want to face inflationary inputs during an election year. In other words, don’t expect a loosening of the oil spigot until the November 2024 election is over, a political reality that’s a tailwind for energy investments.

Powell talks down the markets…

The personal consumption expenditures price index (PCE) report for February, released on Good Friday when the stock and bonds markets were closed, contained no nasty surprises.

The “core” PCE (which excludes food and energy) increased 2.8% on a 12-month basis and was up 0.3% from a month ago, matching consensus estimates. Core PCE was up 0.3% for the month and 2.5% at the 12-month rate, compared to estimates for 0.4% and 2.5%, respectively. Consumer spending spiked 0.8% on the month, well ahead of the 0.5% estimate. Personal income increased 0.3%, slightly softer than the 0.4% estimate.

However, Fed Chair Jerome Powell made downbeat remarks in a press interview Friday, in which he said the central bank won’t “be in a hurry to cut” because economic growth remains strong and inflation is still above target.

Powell’s tougher rhetoric put investors in a jittery mood, with the major U.S. equity averages closing mostly lower on Monday as follows:

• DJIA: -0.60%
• S&P 500: -0.20%
• NASDAQ: +0.11%
• Russell 2000: -1.02%

The benchmark 10-year U.S. Treasury yield (TNX) popped higher by 2.92% to close at 4.32%.

The week ahead…

The economic reports to watch in the coming days are factory orders and auto sales (Tuesday); ADP employment, S&P U.S. services PMI (final), a Powell speech (Wednesday); initial jobless claims (Thursday); unemployment rate, consumer credit, and hourly wages (Friday). Throughout the week, other Fed officials are scheduled to opine, so…buckle up.

Editor’s Note: I’m bullish on cryptocurrency assets, which generally soared in 2023 and are positioned to continue their winning ways in 2024.

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John Persinos is the editorial director of Investing Daily.

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