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1Q24 Market Review – A Quarter of Fresh Record Highs Thumbnail

1Q24 Market Review – A Quarter of Fresh Record Highs

Key Takeaways:

  • Several global equity indices make record highs in 1Q24.
  • Federal Reserve hints at rate cuts but timing uncertain.
  • Growth stocks continue to boost equities higher.
  • Bonds were relatively flat to start the year.
  • Geopolitical tensions keep commodities supported.

Last week we finished what turned out to be a stellar quarter for equity investors. The S&P 500 made 22 fresh new record highs in the first quarter alone. The U.S. was not alone in the robust rally. The MSCI AC World Index, the Eurostoxx 50, the FTSE 100, and the Nikkei 225 Index also made record highs in the quarter. Dovish rhetoric from many global central banks and a surprise move from the Bank of Japan boosted risk sentiment. In addition, U.S. economic data remained supportive of the economy in 1Q24 after a strong finish to 2023 (GDP YoY 3.1%). In this weekly, we offer highlights from the quarter from an economic and asset class perspective.  

  • Job gains remain strong: The three-month moving average of U.S. job gains was strong in 1Q24 (at 264K jobs). However, the unemployment rate moved to the highest level since January 2022 (to 3.9%) as more Americans entered the labor force.
  • Consumer weakening: Core retail sales (ex. gas, autos and building materials) were relatively flat to start 2024. Credit card delinquencies (30 days overdue) jumped to the highest level since May 2020.
  • Manufacturing expands; Services strong: The ISM Manufacturing Index rose into expansion territory (reading above 50) for the first time in 17 months while ISM Services continued to expand in 1Q.
  • Inflation mixed: Inflation as measured by the Consumer Price Index and the Producer Price Index all came in hotter than expected in the quarter. PCE Core came in as expected (+2.8% YoY).
  • Federal Reserve hints at rate cuts: The Fed kept rates unchanged but insinuated several rate cuts before year end 2024.

Global Equities: Still a Growth Story. Every major global equity region rallied in 1Q24 except China. The gains were led by growth stocks as the MSCI AC World Growth Index outperformed the MSCI AC World Value Index by 265 bps.

  • U.S. leads developed markets: The S&P 500 Index outperformed the MSCI AC World ex U.S. Index for the fourth quarter in a row  as tech drove the U.S. outperformance. Japan posted its best quarterly return since 4Q22 as the Bank of Japan said more rate hikes are uncertain.

Fixed Income: Relatively Flat as Inflation and Fed Speak Mixed. The Bloomberg Aggregate Index was relatively flat in 1Q24. Higher than expected inflation overshadowed rhetoric from the Fed that the central bank is close to cutting interest rates.

  • Short duration outperforms: Short-term maturing notes outperformed long term bonds in 1Q24. Leveraged loans and floating rate bonds outperformed 10- and 30-year Treasuries.
  • Risk sentiment supports credit. Risk appetite continued to drive credit in fixed income as emerging market and high yield bonds outperformed the broad index.

Commodities: Strong rally. The Bloomberg Commodity Index rallied for the second time in the past four quarters on supply concerns.

  • Crude oil surges:  Geopolitical tensions in the Red Sea continue to threaten the supply of major commodities, including oil.
  • Gold at record: Gold prices set new record highs in 1Q24 on central bank uncertainty.

© 2023 Authored by Megan Horneman, Chief Investment Officer, Verdence Capital Advisors, LLC.   Reproduction without permission is not permitted. The indexes presented are unmanaged portfolios of specified securities and do not reflect any initial or ongoing expenses nor can it be invested in directly. An investment’s portfolio may differ significantly from the securities in the index.
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