Highlights for this week include:

The preliminary March business surveys and incoming housing data are both consistent with healthy economic growth. The consensus estimate is now calling for 2.0% economic growth in the first quarter.

The stock market rose to new highs on Wednesday as the Federal Reserve reaffirmed projections to cut interest rates three times later this year despite recent firmer-than-anticipated inflation readings.

We continue to see healthy stock market dynamics both in the U.S. and abroad. Most major economic regions and most economic sectors are participating in the bull market. We continue to favor cyclicals, led by technology-related industries.

Business Surveys and Housing Consistent with Healthy Economic Growth

The S&P Global Flash US Composite PMI (an early look at March business activity) showed further expansion of both manufacturing and service sector output. The survey data point to another quarter of healthy economic growth accompanied by sustained hiring as companies continue to report new order growth. The manufacturing survey rose to a 21-month high, pointing to a solid improvement in the health of the sector.

Meanwhile, service providers reported a slower pace of expansion than factories, with the rate of increase also moderating slightly compared to February, linked in part to ongoing cost of living pressures. However, service providers have also become increasingly optimistic about the outlook, with confidence striking a 22-month high in March to suggest the broad-based economic expansion seen in March will persist into the summer.

Housing starts rebounded a better-than-expected 10.7% in February to a 1.521 million unit annual rate. This was the fifth increase in the past six months and the biggest gain since last May. On a three-month average basis, which smooths some of the near-term volatility, housing starts posted their highest level since July 2022. Building permits also rebounded, up 1.9% to a 1.518 million unit annual rate, a six-month high.

Both housing starts and permits are rising from a year ago, up 5.9% and 2.4%, respectively. Furthermore, rising homebuilder sentiment in March points to continued improvement in housing starts in the coming months. The improvement in homebuilding activity is in line with other economic data so far this year that suggests continued economic expansion.

Healthy Stock and Bond Market Dynamics

The stock market continues to make new highs, and we see important reasons to remain bullish on U.S. and global stocks. The 10-year Treasury yield, whose significant rise was a major catalyst for 2022’s market selloff, remains below the key technical level of 4.35%. The U.S. dollar also remains below key levels in a sign of riskon. Uptrends remain intact for broad global indexes and major countries in a sign of broad participation. The corporate bond market is also sending positive signals with low concerns over future defaults.