By: Darren W. King | Wealth Management

Source: Bloomberg, Inc.

Key Takeaways:

• 2024 Fed GDP estimates move higher, up to 2.1% growth in 2024, well above late 2023 estimates at 1.4%
• Global stocks rally in the first quarter, while bond markets see yields move higher
• The Core Consumer Price Index ends 1Q2024 at 3.8%, down from 5.5% in the 1Q2023
• The 10-yr treasury moves from 3.88% on December 31^st to 4.20% at quarter-end following expanding financial conditions and sticky inflation, extending to 4.50% as of April 10
• S&P 500 rallies 10.55% in the 1^st quarter following Fed’s revised outlook on interest rates, resilient economy, and forward S&P 500 earnings revised higher. Communication services and energy lead sector returns

Equity Strategy

We are expecting a more normalized return environment for equities for the remainder of 2024 with valuations needing to also normalize after the strong third and fourth quarter rally. However, we do see a continued broadening of equity returns out of technology and into other areas of the market that have not participated as dramatically in the equity rally. Small capitalization and international equity valuations remain attractive compared to large capitalization peers. Part of the first quarter rally in stocks can be attributed to earnings estimates for 2024 moving higher since the end of last year.

Fixed Income Strategy

Within fixed income markets, interest rate and fed policy have changed dramatically since the end of the first quarter. Ten-year treasury rates are now approaching November 2023 levels, currently at 4.50%, up 30 basis points from quarter-end. Interest rate traders’ conviction for 3 quarter-point rate cuts from the federal reserve in 2024, are fast approaching 2 quarter-point cuts. What we now see, is a higher flat period at current interest rates, with a slower fall from current interest rate levels. Inflation remains sticky as this 3% CPI level and the economy has expanded since the start of the year. While interest rates will fall over time, we see current interest rate levels as an opportune period to extend portfolio duration, invest excess cash in fixed income markets, or take some profits from equity portfolios to add to fixed income exposure.

Click here to read the entire Q1 2024 Market Review.

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