2024 | April 22

The Markets

Stocks Fall Again

The retreat from the record high that the S&P 500 achieved in late March accelerated, as the index finished the week down 3.0% to post its third negative result in a row. The NASDAQ’s weekly decline was steeper at about 5.5%; in contrast, the Dow posted a tiny gain.  

Worries about technology companies and the interest-rate outlook weighed on growth stocks, and a U.S. large-cap growth benchmark trailed its value counterpart by a wide margin. The growth stock index closed down nearly 5% for the week versus a less than 1% decline for the value index.

Yields of U.S. government bonds rose for the third week in a row as investors continued to rein in their expectations for near-term interest-rate cuts. The yield of the 10-year U.S. Treasury bond briefly rose as high as 4.69% on Tuesday—the highest since last November—before retreating somewhat to close at 4.61% on Friday.

U.S. Federal Reserve Chair Jerome Powell conceded that it’s “likely to take longer than expected” to gain confidence that inflation is on a sustainable downward track. Powell on Tuesday reinforced recent messaging about a delayed timeline for interest-rate cuts, saying “it’s appropriate to allow restrictive policy further time to work.”

An index that tracks investors’ expectations of short-term U.S. stock market volatility rose for the third week in a row to the highest level in nearly six months. On Friday afternoon, the CBOE Volatility Index (VIX) was up 46% from a recent low on March 27.

The price of U.S. crude oil briefly spiked around 4% to more than $85 per barrel late Thursday in the wake of the latest hostilities between Israel and Iran. However, prices quickly reversed course as tensions eased somewhat, and Friday afternoon’s price of around $83 marked a roughly 3% decline for the week.

Thursday’s scheduled release of the U.S. government’s initial estimate of first-quarter GDP is expected to show that the economy remained on a solid growth track but slowed relative to last year’s fourth quarter, when GDP grew at a 3.4% annual rate. An estimate released on Tuesday by U.S. Federal Reserve economists projected a first-quarter growth rate of 2.9%.  

Source: John Hancock Investment Management

Schwab Paperless Preferences

Chief Executive Officer (CEO) Pay Increased?

It’s not an economic indicator, but the compensation companies pay CEOs affects employee, customer, and public perceptions.

“Pay is critical for attracting, retaining, and motivating a CEO, and affects the wider company beyond the CEO – high pay may demotivate employees or damage a company's customer reputation. Even more broadly, CEO pay across the economy influences the public's perception of capitalism,” explained researchers Alex Edmans, Tom Gosling, and Dirk Jenter in the Journal of Financial Economics.

Last year, median annual pay for America’s CEOs hit a new record: $23.7 million, an 11.4 percent increase from the prior year, reported Andy Serwer and Angela Palumbo of Barron’s. “Median pay for CEOs in this group is now a record 300 times that of their median employee’s, compared with a ratio of 255 in 2018,” reported Serwer and Palumbo.

Serwer and Palumbo cited data from an analysis of the largest pay packages for CEOs at U.S. public companies with revenues of $1 billion or more. CEO pay at the companies measured ranged from about $162 million to about $19 million in 2023.

So, how does the increase in CEO pay stack up? It was:

• Higher than inflation, which was up 3.4% in 2023.
• Higher than wage and salary increases for union workers, which averaged 5.4%.
• Higher than wage and salary gains for non-union workers, which averaged 4.2%.
• Higher than benefits cost increases, which averaged 3.6%.

Median annual pay for U.S. workers was about $58,000 in 2023, according to Eric Van Nostrand, Laura Feiveson, and Tara Sinclair of the U.S. Treasury Department.

“Before anyone feels compelled to storm the barricades, it’s worth noting that the 11.4% gain in CEO pay is less than the 13.8% total return to shareholders produced by these companies last year. In fact, CEO pay for top companies climbed 8.77% on average annually over the past six years, while the total annual average return for these companies was 12.02%.” reported Serwer and Palumbo.

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Charles Schwab

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Emily Triano

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