And They’re OFF!
The New Year brought hopes of a continuation of the market performance experienced in 2023. Investors got what they prayed for, a continued market rally in the 1st quarter of 2024. The concern for the Federal Reserve keeping interest rates higher for longer did phase investors. Stocks posted notable gains to start the year off.
Technology stocks continued their march higher, led by the stocks of companies that benefit from artificial intelligence. Value stocks performed inline providing a complement for broader market growth. Expectations that the Federal Reserve would start to cut rates in March dwindled as inflation remained persistent. Will it be the second half of the year or 2025 before inflation retracts and the Fed starts to trim interest rates? This waits to be seen. Despite no interest rate cut by the Fed, the economy and corporate earnings remained stronger than expected and stocks benefited from positive investor sediment.
Valuations in the bond market remained under pressure, however investors seeking higher yields in savings and bond interest benefited from interest rates remaining elevated.
The real estate sector struggled as interest rates remained in the high inflation zone, causing access to cheap money for borrowing and refinancing to remain elusive for investors.
International markets in developed countries performed in line with US markets to bring about a positive broad market rally. Mirroring the US markets, the technology sector led the way with Artificial Intelligence stocks followed by the financials, consumer discretionary, and industrial sectors. The gains in these sectors were the result of cooling inflation, despite the European Central Bank not cutting rates. Like the Federal Reserve, the European Central Bank is in a wait and see mode. This is due to economic and consumer data remaining strong, limiting the desire of these interest rate monitoring organizations from acting and cutting interest rates too soon.
The UK markets advanced, led by the financial, industrial, and energy sectors. There was no interest rate cut by the Bank of England at their March meeting, even though inflation has dropped off as measured by their Consumer Price index to 3.4% in February from a high of 11.1% recorded in October of 2022. A technical recession in the UK revealed itself as economists mulled over economic data from the second half of 2023. Will this marker lead to deeper recessionary pressure in the UK? This might be the catalyst for the Bank of England to start loosening their interest rates belt.
In Japan, measures to lift its negative interest rate policy that has gripped the country since the global recession of 2007 gave a boost to their markets and economy. Large Cap value stocks in the automotive and financial sectors outperformed. The global demand for AI technology and semiconductors pushed their markets higher. As the rest of the developed world markets continue to fight inflation, Japan has welcomed it. Corporate earnings exceeded expectations in the 1st Quarter as companies with the ability to raise prices benefited most.
Emerging markets had a mixed bag of returns with most Pacific Rim countries markets bouncing off their recent lows with Artificial Intelligence stocks leading the way. However, investors remained cautiously optimistic over China’s economic outlook. Chinese markets remained in negative territory this quarter as post-pandemic recovery remains slow and continues to weigh on their markets.
The uncertainty of the United States future interest rate policy continues to project pressure on the markets, as is evident when inflationary data comes in hotter than anticipated and markets sell off. How do you adjust your investment allocation to offset this uncertainty is the roll of your partnership with an Investment Advisor.
At Renew Family Wealth it is our desire that our clients invest based on their appropriate risk tolerance. When the market environment and life circumstances change it is important to understand how these conditions impact your finances and how you invest. We welcome the opportunity to assist in evaluating how these conditions are affecting you, your family, and those you know. Please do not hesitate to contact us to set up a meeting to discuss how we may be useful to you. Thank you for the opportunity to serve you.
Sincerely,
Your team at Renew Family Wealth
