The first quarter of 2024 showed dynamic market movements. Amidst these fluctuations, global equities surged to new heights, led by a surprising economic resilience and robust corporate profits. In this market review, we delve into the intricacies of these dynamics, examining the highs and lows of various asset classes and the evolving landscape of investment opportunities. From the surge in stocks to the challenges faced by bond investors, we navigate through the complexities of the financial world in the first quarter of the year.
Stocks sprang to new highs led by surprising economic resilience and strong corporate profits, while bonds experienced a modest downturn as interest rates rose after markets scaled back interest rate cut expectations.
Within global equities, US stocks led the pack with 10.6% returns, its best quarter since 2019, and notched 22 new record highs along the way. Unlike 2023, the market rally broadened in 2024. In 2023, a narrow group of technology stocks, primarily tied to artificial intelligence, called the Magnificent 71, contributed nearly 60% of S&P 500 annual gains of 26.3%.
In 2024, their contribution fell to 41% of the 10.6% gains, while the other 493 stocks contributed 59%2. In international equities, better-than-expected progress on inflation in Europe and a weaker yen, paired with optimism from corporate governance reform in Japan, led to new highs for European and Japanese stocks. The developed international region as a whole gained 5.9% for the quarter. While the US and developed international markets set new records, emerging market equities trailed with a 2.4% gain as strong gains in Taiwan, India, and Korea offset losses in China.
Within US markets, all sectors except real estate were positive for the first quarter. The market rally broadened as sectors beyond technology, such as financials, energy, and industrials, also enjoyed double-digit gains and outperformed the S&P 500 index, while defensive sectors, such as utilities and consumer staples, lagged.
Across size, bigger stocks did better and, within style, growth continued to outperform value. Large caps (S&P 500) rose by 10.6% and outperformed small caps (S&P 600), which only rose by 2.5%. This divergent performance can be attributed to the fact that the small-cap index has a lower weight of technology stocks. Finally, across style, the Nasdaq, a heavy growth and technology-oriented index, gained 9.3%, while the Dow Jones 30, a value-oriented index often synonymous with dividend payers, was up 6.1%.
Bond investors suffered modest losses as interest rates rose following scaled-back expectations for interest rate cuts. US bonds fell 0.8% in the first quarter of 2024. Lower quality bonds, such as high yield, were surprisingly resilient on strong fundamentals and gained 1.5%.
Finally, across other asset classes, commodities and gold gained while REITs fell. Gold, viewed as the ultimate safe haven asset, gained 7%, driven by increased purchases from central banks, rising concerns over geopolitical conflicts, and anticipated Federal Reserve interest rate cuts. Lastly, rate-sensitive REITs came under pressure and fell 1.3%.
1Magnificent 7 group includes Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia, and Tesla.
2JPMorgan. Bubble or bliss? Why we think stocks could grind higher. Data as of 3/26/24
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James Artale is a financial advisor located at EmVision Capital Advisors, 251 W. Garfield Rd. Suite 155 Aurora, OH 44202. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at (330) 954-3770 or at info@emvisioncapital.com.
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