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Earnings: The expected earnings growth in 2024 is still dominated by a small number of mega-cap companies. Here is a comprehensive preview of the Q4 earnings season that is currently underway.

“It is interesting to note that four of these six companies are also projected to be the top four contributors to earnings growth for the S&P 500 for Q1 2024: NVIDA, Amazon.com, Meta Platforms, and Alphabet. In aggregate, these four companies are projected to report year-over-year earnings growth of 79.7% for Q1 2024. Excluding these four companies, the remaining 496 companies in the S&P 500 would be projected to report year-over-year earnings growth of 0.3% for Q1 2024. Overall, the estimated earnings growth rate for the entire S&P 500 for Q1 2024 is 4.6%.” 

Interest rate cuts: The last seven months of inflation data have come in at or below the Fed’s 2% target. The question now? When will the Federal Reserve move forward with their much anticipated rate cuts? Government spending, business investment and the consumer have all contributed to the resilient economy we have experienced over the past year. The expectation for 2024 is for government spending and business investment to slow, leaving the consumer to pick up the slack – a tough ask should interest rates remain at their currently restrictive level.

Our thoughts? This scenario likely leads to a Fed that begins cutting rates in the spring and moves its focus from tempering inflation to sustaining the economic status quo of stable employment and solid GDP growth.

Middle East tensions: The situation in the Middle East continues to escalate with a recent attack on a U.S. military barracks that resulted in the deaths of three service members and injury to dozens more. These recent developments are surely going to result in a forceful response by the United States and its allies. 

War is always unsettling to investment markets. Each week the status quo of the Middle East tensions continues to spiral lower. With no quick and easy solution, this part of the world will likely remain a dominant geo-political issue throughout 2024.

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