Broker Check

Market Commentary - Q1 2024

April 16, 2024

The US stock market kicked off 2024 in familiar fashion – it kept on going up. After a very strong final two months in 2023, the S&P 500 index rose 10.56% in Q1 2024, culminating in its first new all-time high in over two years being reached on 1/19/24. Since that date, the index has tacked on another 8.44% to finish the quarter 9.42% above its value at the onset of the bear market that began on January 4, 2022. However, the index is still trading 4.5% below its pre-bear market high when adjusting for inflation.

Though largely driven by the likes of ‘Magnificent Seven’ names such as Nvidia (up 122% YTD after climbing 239% in 2023), all economic sectors except real estate posted gains in Q1, with notable relative strength in the energy and financial sectors. Even small company stocks participated, demonstrating the broad market’s improved breadth which was absent for most of 2023.  

Foreign equity markets also advanced in the first quarter; the MSCI EAFE developed markets index gained 5.93% and the MSCI Emerging Markets index rose 2.44% in Q1. The US bond market, however, once again disappointed fixed income investors as the strong 2023 year-end rally faltered. Declining bond prices pushed yields on the 10-year US Treasury bond from 3.88% to 4.20% over the quarter, as the Bloomberg Aggregate US Bond Index fell .78% in the first quarter.

The Fed’s suddenly dovish election year messaging has emboldened the bullish crowd on Wall Street to keep on buying stocks despite historically elevated valuations, especially among the high-flying giant technology names which seem poised for outsized growth fueled by the artificial intelligence (AI) boom. With stubbornly high inflation readings and soft economic data (when adjusted for out-of-control government spending), the Fed has no apparent economic justification for reducing interest rates any time soon. If reality forces the Fed to hold off on rate cuts, look out below when Wall Street traders throw a tantrum – this market has a long way to fall from its current lofty valuations. Regardless of whatever the Fed does or doesn’t do, investors should expect normal market corrections, which should provide more profitable entry points for those who may be tempted to chase the market higher out of FOMO (fear of missing out).

 

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Market data provided by JPMorgan Asset Management and MarketWatch.com.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. The MSCI EAFE Index consists of the following developed country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the UK.

The MSCI EM (Emerging Markets) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of the emerging market countries of the Americas, Europe, the Middle East, Africa and Asia. The MSCI EM Index consists of the following emerging market country indices: Brazil, Chile, Colombia, Mexico, Peru, Czech Republic, Egypt, Greece, Hungary, Poland, Qatar, Russia, South Africa, Turkey, United Arab Emirates, China, India, Indonesia, Korea, Malaysia, Philippines, Taiwan, and Thailand.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell 3000 index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

The Bloomberg Barclays U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.

Investing involves risk including the potential loss of principal.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

Foreign investments involve greater risks than U.S. investments, including political and economic risks, limited liquidity, and the risk of currency fluctuations. Investing in emerging markets may involve greater risk and volatility than investing in more developed countries.