Muhlenkamp & Company Quarterly Letter – April 2024

Fellow Investors,

It’s been a quiet quarter for economic news. Inflation as measured by the Consumer Price Index (CPI) was 3.2% on February 29th, up from January’s 3.1% and not far from the recent low in June ’23 of 3.0%. Real (inflation adjusted) GDP growth was 2.5% for the 4th Quarter of 2023 with the Atlanta Fed’s “GDP Now” calculation showing an estimated current GDP growth of 2.8% on April 1, 2024. Based on those measurements of inflation and economic health, the Federal Reserve decided at their March meeting to leave the Federal Reserve Target Rate unchanged in the range of 5.25 – 5.5% and to continue shrinking their balance sheet as they have been since the summer of ’22. Short-term interest rates remain above long-term interest rates (the yield curve is inverted) and we expect this will revert to a normal, positively sloped yield curve at some point. We don’t know if this will happen because the Federal Reserve cuts short-term rates (they keep hinting that they will this year) or because long-term interest rates rise, or a combination of the two.

The markets in the first quarter, however, have not been so quiet. The S&P 500 Total Return index is up about 10% from January 1st through the end of March. The best performing stocks were technology companies believed to be beneficiaries of developments in artificial intelligence followed by companies that will benefit from increased infrastructure spending. Long duration bonds have sold off a little this year with the iShares 20+year Treasury ETF (TLT) down 5.5% from January 1st through the end of March. The spot price of gold is at all-time highs at the end of March.