The month of February was filled with record-breaking performances as all three major indices topped their all-time highs. Most notably, the S&P broke above the 5000 level after hitting resistance around the 4800 level in December 2023 through January 2024. The prior high was hit back in late 2021, so it has taken over two years for the S&P 500 Index to break out to new ground (see chart below). Along with the U.S. markets, Japan’s Nikkei index finally surpassed its 1989 all-time high this past month. That’s right. It took almost 35 years for the Japanese stock market to eclipse the high it reached in late 1989. According to BlackRock, “While the yen’s weakness has helped the value of (Japanese) corporate earnings made abroad, the market’s outlook also remains positive because higher inflation is letting firms raise prices and protect margins, as wage growth fuels consumer spending.”
In news of other assets, bitcoin was up around 44% for the month of February. In our most aggressive strategy, we currently have an allocation of the portfolio invested in a bitcoin ETF that invests in futures contracts but does not invest directly in the cryptocurrency itself. The price hit $62,000 which is just about 10% shy of its all-time high of $69,000 in November of 2021. Much of the gain here can be attributed to the upcoming halving event. The bitcoin halving event occurs about once every four years. In short, the reward that miners receive for validating transactions and securing the network is halved. The Bitcoin halving event often sparks significant interest and speculation within the cryptocurrency community and beyond. It is viewed as a key factor influencing the economics of Bitcoin, potentially impacting its price due to the reduced supply of new coins entering circulation. Historically, each halving has been associated with a bull market cycle, although the exact relationship between halving events and price movements is subject to debate among analysts.
Between the overall markets and Bitcoin posting strong returns in February, there is lots of euphoria going around! With that, you never know when the other side of the mountain will come. That’s why at FSA we utilize the FSA Safety Net® as our exit strategy. We know that it’s not what you make but what you keep that truly matters.
As the market continues to perform well, investors are increasingly optimistic of the chance that the Federal Reserve will be able to successfully achieve the goal of a soft landing. The markets will be closely watching the trajectory of interest rates, driving anticipation for the foreseeable future. At its last meeting in January, the Federal Open Market Committee opted to maintain interest rates at their current range of 5.25% to 5.5%, its highest target range in 22 years. The consensus is that rates will remain unchanged at the next meeting in late March.
Fidelity posted a report that the number of 401k “millionaires” has increased 41% from last year. This is thanks to strong performances in stocks and bonds in 2023, coupled with steady savings rates and employer-provided matching contributions. That being said, a strong market in 2023 was not the only factor in this increase. Fidelity said that 27% of plan participants proactively increased their contribution rate throughout last year. And 78% of 401(k) savers were contributing at a rate high enough to get their employers’ full matching contribution.
If you would like to join the 401k millionaire club, talk to your advisor and tell them of your goals and any changes in your life so we can best adjust how we manage your money.
Chris Jones
Trader
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