Between Scylla and Charybdis

March 5, 2024

In February, overall returns were a mixed bag with equities performing well but debt markets returning negative for the month. The S&P 500 returned up 4.03% and NASDAQ  was up 4.06%. Although performance is certainly not indicative of future results, we find it relevant to note that inclosing out the third full week of the month, both the S&P 500 and the Dow Jones Industrial Average (DJIA) hit all-time highs. International markets, as tracked by the MSCI emerging markets index and the MSCI World Index, remained positive despite continued international turmoil, returning 4.10% and 3.58% respectively.

Bonds were where we saw the decline, returning down -1.96% as tracked by the Bloomberg US Aggregate Bond Index (LBUSTRUU). Large-cap exposures were up 3.58% and small cap up 2.87% tracked by the MSCI World Large Cap Index and MSCI World Small Cap Index, respectively. Real Estate Investment Trusts (REITs) have been a popular addition to many portfolios in recent months, but their recent performance unfortunately, hasn’t been stellar. Tracked by the Dow Jones U.S. Select REIT Index , they are down -4.02% Year-to-Date (YTD) but they pulled through on the last day of February to end the month up .11%. Inflation reports, like the Personal Consumption Expenditures (PCE) report, may help REIT performance, as it will likely influence future interest rate changes by the Fed.

The Bureau of Economic Analysis released their latest PCE price Index report, the Fed’s preferred inflation gauge, on February 29.1 Previously this month, many Fed officials commented that they were not interested in lowering rates until there is more evidence that inflation is on a downward path. The report showed that the PCE price index had increased .3% from January, not what the Fed is looking for. Previously this month, the Bureau of Labor Statistics released its latest Consumer Price Index data (CPI) which also showed an increase of .3%.2 This means that in comparison to the last six months, inflation is decreasing more slowly than anticipated, which – again – is not what the Fed is looking for.

The comments from Fed officials, along with the two previously mentioned reports released this month, each  showing less evidence that inflation is slowing, leads one to believe that it will be some time before rates are lowered. Markets on futures and forwards indicate that investors now speculate that the first-rate cuts will not come until June. Before the CPI report, investors were anticipating cuts in May. Looking ahead, the path for central banks to return to the 2% target inflation rate seems choppy. Unfortunately, this presents the idea of ‘reinflation’ as a very real hazard.

While there may have been chatter beforehand, this threat of reinflation is a topic that has risen to the surface during the month of February. Reinflation is the idea that the inflation we saw in recent years is going to return despite the progress on lowering inflation that we saw in 2023. This is the main risk the Fed is facing as they stay prompted to hold rates. The underlying amplification of  this risk is that if/when the Fed does lower rates, consumers tend to feel better and will in turn spend more money which would result in higher inflation instantaneously.

So, there is clearly no easy decision because higher inflation is possible in either case. On the other hand, if rate cuts are delayed for too long it could severely weaken the economy and even force the U.S. into a recession. We saw an example of this occurrence in 2006 and2007, directly preceding the Global Financial Crisis. This puts  the Fed in an awkward position because they face inflation increase and a weakened economy whether they continue to hold rates or they lower rates.

For the near-term, their decision seems clear, they won’t cut until they see the evidence of lowered inflation. However, if the evidence of lower inflation does not present itself in a timely way, our economy could beat risk. Fortunately, there is a Fed meeting scheduled for mid-March, so we will hopefully know more when the minutes from that meeting are released. 


Hazel Allen
OPS Analyst

Published February 29, 2024; Accessed March 1, 2024

Published February 13, 2024; Accessed March 1, 2024

The S&P 500 Index is the Standard & Poor’s Composite index of 500 stocks and is a widely recognized, unmanaged index of common stock prices.

The NASDAQ Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market and itis highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies.

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange.

The MSCI Emerging Markets Index consists of 23 economies including Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and the United Arab Emirates. The MSCI is a float-adjusted market capitalization index.

The MSCI World Index is an unmanaged free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets.

The Bloomberg Barclays U.S. Aggregate Bond Index (LBUSTRUU) is a market capitalization-weighted index, meaning the securities in the index are weighted according to the market size of each bond type. Most U.S. traded investment grade bonds are represented.

A real estate investment trust (REIT)is a company that owns, operates, or finances income-generating real estate. Modeled after mutual funds, REITs pool the capital of numerous investors. This makes it possible for individual investors to earn dividends from real estate investments—without having to buy, manage, or finance any properties themselves.

The Dow Jones U.S. Select REIT index is comprised of companies whose charters are the equity ownership and operation of commercial real estate and which operate under the REIT Act of 1960.

The Consumption Index (PCE) price index is defined as personal consumption expenditures (PCE) prices excluding food and energy prices. The core PCE price index measures the prices paid by consumers for goods and services without the volatility caused by movements in food and energy prices to reveal underlying inflation trends.

The Bureau of Economic Analysis (BEA) is an independent, principal federal statistical agency that promotes a better understanding of the U.S. economy by providing timely, relevant, and accurate economic accounts data in an objective and cost-effective manner. 

The Bureau of Labor Statistics is the Department of Labor’s principal fact-finding agency for the federal government in the field of labor, economics, and statistics. It provides data on employment, wages, inflation, productivity, and many other topics.

The Global Financial Crisis (GFC) refers to the period of extreme stress in global financial markets and banking systems between mid-2007 and early 2009. (Source:

There are certain limitations to technical analysis research, such as the calculation results being impacted by changes in security price during periods of market volatility. Technical measurements are one of many indicators that may be used to analyze market data for investing purposes and should not be considered a guaranteed prediction of market activity.

The Reports' commentary, analysis, opinions, advice, and recommendations represent those of Stadion Money Management and are subject to change at any time without notice. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass Stadion reserves the right to modify its current investment strategies based on changing market dynamics or client needs. This document may contain certain information that constitutes “forward-looking statements” which can be identified by the use of forward-looking terminology such as “may,” “expect,” “will,” “hope," "forecast,” “intend,” “target,” “believe,” and/or comparable terminology. No assurance, representation, or warranty is made by any person that any of Stadion’s assumptions, expectations, objectives, and/or goals will be achieved. There is no guarantee of the future performance of any Stadion portfolio. This material is for information use only and should not be considered financial advice. The data presented has been gathered from sources believed to be reliable; however, their accuracy, completeness, or reliability cannot be guaranteed. We make no warranties and bear no liability for your use of this information.

Diversification does not eliminate the risk of experiencing investment losses.

Stadion Money Management, LLC("Stadion")is a registered investment adviser under the Investment Advisers Act of1940.Registration does not imply a certain level of skill or training. More information about Stadion, including fees, can be found in Stadion's ADVPart2,which is available upon request.

Past Performance is no guarantee of future results. Investments are subject to risk, and any of Stadion's investment strategies may lose money.