As a kid, I remember that the start of baseball season meant the weather was about to get warmer, school was nearing the finish line and summer was about to start. Back in the early to mid 1980's, my favorite team - the San Francisco Giants of course - were mostly pretty bad. Despite a lot of losses and not a lot of star power, some of my favorite memories were making the trek from Petaluma to Candlestick Park with my parents, sister (and sometimes my grandparents who absolutely LOVED baseball would join us too.) Good family bonding and bad baseball (while maybe not ideal) was enough to make this youngster very happy at the time.
Luckily for me, in 1986 a hot-hitting, slick fielding, brash first baseman from Louisiana joined the team and seemingly with his sheer will the Giants' fortunes quickly turned. They went from perennial losers to contenders overnight. Will Clark, that young phenom of a first baseman from the Bayou State was a star from from his first at-bat when he hit a home run off of the legendary future Hall of Famer Nolan Ryan!
As it turned out, baseball (and family bonding) is better when your favorite team has a superstar player and is actually good. I'll never forget the summer of 1987 when the Giants and Cincinnati Reds battled it out for the National League West title and a spot in the playoffs. Back in those days, you couldn't watch every game on TV (let alone your smartphone) and only two teams from each division made the playoffs. I remember listening to games on the radio - living and dying on every pitch - not too dissimilar to how I follow the markets today actually.
The Giants ended up winning the NL West title to earn a spot in the playoffs against the St. Louis Cardinals. I was beyond elated and (perhaps slightly, overly) enthusiastic. I remember sitting with my grandparents at their kitchen table, listening to the sports talk show host wax poetic about the romanticism of baseball and the storybook season of my favorite team. The excitement was palpable and I remember how much I looked forward to there being a new game every day.
I was sure the Giants would win the World Series, thus cementing 1987 as the greatest year in my life at that point. Unfortunately, those hopes were quickly dashed when the Giants lost to the Cardinals in a crushing (if uneventful) game 7 and yep, you guessed it I was crushed. My parents and grandparents consoled me as best they could and reminded me that there was always next year.
There were right of course, I did eventually get over the disappointment of 1987...but not until 2010, when the Giants won their very first World Series title since moving to San Francisco in 1958. But, that's a story for another day.
If you are still reading this you may be wondering what in the heck does baseball and the Giants have to do with investing?
First off, thank you for indulging me. Second off, there is a point to all of this - I promise.
Fast forward to 2024 and the start of baseball season means something very different to me now. As the first pitch of the season gets thrown, March is about to end and the first quarter of the year is about to be in the record books. We've had three months to digest the previous year's economic results and also have 25% of the economic data for the current year. With any luck, this information will confirm what we think is happening and give us an idea about where we're headed.
As I write this after the final trading day of March, the S&P 500 finished the month at it's 22nd record high of the year!
Yes, you read that correctly - the stock market has closed at record highs 22 times already in 2024. Earnings, GDP, employment, inflation, the stock market all continue to trend in positive directions. If our economy was a baseball team, it would likely be the best team in the league hitting a ton of home runs with dominating pitching and superb defense.
Perhaps more importantly, the stock market is getting contributions from nearly all sectors of the economy. For the last decade plus, tech stocks have been just like Will Clark on that 1987 Giants team, seemingly being responsible for all the winning (or losing). Much has been made of the Magnificent 7 (Apple, Nvidia, Microsoft, Tesla, Meta, Alphabet and Amazon, not the classic film of the same name) and their being responsible for much (if not all) of the positive market results.
So far in 2024, the rally has been more widespread with Energy, Communications, Industrials, Materials and Financials leading the way. In contrast, while still solidly positive for the year - tech stocks have lagged to the bottom half of the returns among the 10 stock sectors. Just like in baseball, the team that has the most players performing at high levels is likely going to win a lot of games.
For the first 3 months of 2024, the U.S. stock market is absolutely performing at a high level and winning a lot more days than it's losing.
Will this trend continue? Obviously, only time will tell and we have three quarters of the year left to go. There are a lot of innings left to play and like a baseball team, our economy could hit a slump. We will likely face some form of internal and/or external challenges between now and year's end. In 2023 and thus far in 2024, our economy has been extremely resilient to such pressures: brushing off inflation fears, Fed interventions (or lack thereof,) geopolitical strife and the rest.
I remain optimistic about our economy and the stock market (and yes, even the Giants too) but as always, stay tuned!
Until next time, please take good care and drop me an email or call if you'd like to talk!
Steve