1st Quarter 2024 Review & Commentary: Thank Goodness for a Breather

By anyone’s estimation, the equity markets enjoyed a tremendous first quarter, and a great start for the year. This quarter’s performance built on the positive momentum from Q4 2023. There were a number of interesting highlights with the major equity indices delivering the biggest first quarter gain since 2019.  In the first quarter of 2024, we saw the DJIA advance 5.6% and the S&P 500 gained 10.8%. The NASDAQ was up 10.9% and the Russell 2000 was up 5.6%. Most of the positive results were driven by rate cuts still being on the table, and the “buzz” of Artificial Intelligence (AI) which was very similar to the dot.com   investment frenzy in 1999. In Q1, most companies associated with AI brought excellent returns, almost for the asking. Volatility was flat to down, which helped people keep their nerves in check, albeit with some small blips along the way. Oil was also on the rise during the quarter, and has increased significantly since 2023. Overall, Information Technology and Communication Services really led the way for sector returns. 

The Fed was bullish in the quarter, in that they implied that rate cuts were coming, and boy did the stock market respond to that bullish sentiment! The FOMC left rates unchanged and, as in previous reports, were claiming data dependency on information from upcoming quarters. In essence, the Fed wanted to see “evidence” that inflation was moving to the prized 2% range. There was notable IPO activity in the form of Trump’s media company and Reddit. They were successful, and cryptocurrency seemed like it was on the rise again. Stocks were becoming expensive at approximately 20X the forward 12-month PE ratio. GDP was up 3.4% which was largely due to consumer spending and retail sales, but consumer sentiments proved to be wary about things to come. New home sales began their decline, as most likely stoked by higher and stickier mortgage rates. First time home buyers are still struggling to afford housing, and more of them are still renting. 

Headwinds began to reveal themselves in relation to rising consumer debt and elevated interest rates. Most accountings of the CBO and other government forecasts seem to support a slowing growth trade over the next few quarters. Overall, the first quarter was impressive and U.S. markets certainly outperformed its counterparts in Europe; however, as they say at 10 o’clock on New Year’s Eve, “it’s still early.” The markets have shown resiliency, of which the American consumer can be proud. The question of the number of interest rate cuts this year and Congress’ ability to slow spending, coupled with geo-political risks may be the lynch pin to what type of returns the Market brings us for the remainder of the year. We have primarily stayed the course from an investment thesis standpoint, but we are maintaining favorable cash levels to take advantage of expected pullbacks. 

In other news, we are thrilled to report that Alec Campbell has joined the company, and we look forward to the opportunity to personally introduce him to our clients as we welcome him to the firm.

Take care and be well.

Zandy Campbell, AIF®