Q1 2024 Recap
Indices YTD Performance (1/1/24- 3/27/24):
The markets have been nothing short of remarkable since the lows we saw on October 12, 2022.
The S&P 500 is up over 46% since then and many believe we are in the beginning of a new bull market.
Although the gains have certainly been welcomed, is this rally sustainable?
Let’s get into it.
CPI Heats Up, Rates Stay Elevated
The February CPI report showed inflation was slightly hotter than expected. This is just a single data point and something to continue to monitor.
The good news? Inflation is still trending lower:
The Federal Reserve did not cut rates at their March meeting. Several Fed members are urging patience and don’t seem to be in a rush to cut rates, which could change on a dime. Chairman Powell did show his hand and highlighted three potential cuts at some point this year.
There could be more downside risk to risk assets if inflation doesn’t continue to moderate as many expect.
Hard Data For The Win:
We received data during the quarter that highlights a strong economy:
Retail sales exceeded expectations.
Industrial production and manufacturing output outperformed.
Jobless claims fell more than anticipated.
Housing starts declined less than expected.
Building permits surged beyond forecasts.
The US added 275,000 jobs in February 2024, surpassing estimates.
Unemployment rate is still below 4%.
The US saw the economy grow (GDP) at a 3.3% annual pace from October through December 2023.
You still betting against the American economy?
Rarely Seen Drawdowns in 2024
One thing that has been fascinating to me is that we have seen very little drawdowns thus far in 2024.
The week of March 11th marked the first back-to-back weekly decline for the S&P 500 since October 2023.
The largest dip the S&P 500 has experienced year to date is -1.7%:
Liz Young hits on this more here.
I expect more volatility throughout the year, especially with an election coming.
Despite the substantial gains and little downside volatility, we still have plenty of people complaining 😊
Earnings Season: A Crucial Test
This upcoming earnings season will be a good gauge to see if these recent gains are justified. In any event, a strong start to the year usually implies the rest of the year will be strong:
Per Ryan Detrick,
The S&P 500 has been higher in Jan, Feb, and March 20 times since 1950. This yr will be number 21. The rest of the year (final 9 months) was higher 19 times and the avg return was much better as well.
Risk Appetite Is Back:
We saw a crypto resurgence during the quarter, especially with the roll out of the new Bitcoin ETFs.
Interesting chart here:
We also saw a few IPOs during the quarter, most notably Reddit and Trump’s new Media Company (LOL).
Based on those price moves, people are interested in those games again…
It’s Not Just Big Tech:
Despite these gains, Apple is down 8% YTD and Tesla is down 29% YTD. What happened to the ‘Magnificent Seven’??
Through mid-March, there were five S&P 500 sectors that hit record highs. Another seven sectors were within 5% of their all-time highs.
It’s good to see market breadth and big-, medium-, and small companies performing well.
US Still Dominates:
The US still dominates the world from a stock market stand point:
Since 2009, $AWCI (All-Country World ex-US index) has outperformed the S&P 500 over a 1-year timeframe just 14.7% of the time, and only under very specific conditions: after genuine panic, after long-run underperformance, or when large-cap tech underperforms.
Source: DataTrek Research
But it’s good to see other stock markets performing well, like Japan which finally reached a new all-time high surpassing the previous record set in December 1989…
Conclusion:
What a quarter it was. The US economy is still in good shape. Consumer confidence is fairly neutral, but the labor market is still holding up and many are still seeing their wages grow.
But don’t expect a straight line up from here. In my opinion, we are due for some volatility, which is completely normal.
Let’s have a great Q2!
Disclosure: This material is for general information only and is 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.
All investing includes risks, including fluctuating prices and loss of principal.