Noteworthy Numbers

22

 The S&P 500 has closed at a new all-time high 22 times so far in 2024. 

10

The Energy sector led all S&P 500 sectors for the month with a return of over 10%. 

2

Mid Cap stocks had strong performance in March. The S&P 400 Mid Cap Index outperformed the S&P 500 Large Cap Index by over 2%. 

Our Take

By Bobby Moyer, Advisor & Sandy Wiggins, Managing Director

The S&P 500 was positive for its fifth consecutive month in March as the index was up 3.22% and is now positive by 10.56% for the first 3 months of the year. The S&P 500 Value Index outperformed the S&P 500 Growth Index in March by over 2% while growth has outperformed value year-to-date. For the first quarter, the Growth Index was positive by 12.75% outperforming the Value Index by 4.7%. The S&P 400 Midcap Index was positive 5.6% for the month, outperforming the S&P 500 by over 2%. Mid Cap stocks have also performed well year-to-date and are up by 9.95% during that period. The Small Cap Index was positive by 3.2% in March outperforming large caps by 2 basis points but was only positive by 2.5% for the 1^st quarter and lagged both its Large and Mid Cap counterparts during that period.

International markets also performed well as the MSCI EAFE Developed Markets Index was positive by 3.4% in March and is up 5.93% year-to-date, while Emerging Markets was up 2.52% in March and 2.44% year-to-date.

Not only did stocks have a great month but bonds also performed well. Generally, interest rates fell during March which helped to boost bond returns. The Bloomberg Aggregate bond index returned 0.92% in March but was still negative for the first quarter, down 0.78%. The Bloomberg US High Yield Index was up 1.18% in March and is now positive by 1.47% year-to-date.

Turning to the S&P 500 sector returns, Energy led the way for March and was up 10.6%. Other strong sector performers for the month were Utilities up 6.62% and Materials up 6.5%. There were no negative S&P sectors in March as Consumer Discretionary, the worst performing sector for the month, finished positive by just 10 basis points. Real Estate was the only sector negative in the first quarter of the year as it was down 0.55%. The strongest performing sectors in the first quarter were Communication Services leading the way up 15.82% followed by Energy up 13.69%, Technology up 12.69% and Financials up 12.46%.

As the numbers outlined above indicate, equity markets have been very strong to start the year and the market rally has broadened out to include other asset classes and sectors outside of the mega cap growth and tech stocks that led the market for much of 2023. This is a sign of a healthier market and investors who stayed diversified are being rewarded. As the market continues to set new all-time highs some investors may be wondering how long this rally will last.

The Federal Reserve remains top of mind when considering market performance for the remainder of the year. The Fed left rates unchanged at their March meeting but announced that they anticipate cutting rates 3 times during 2024. The economy has remained strong throughout the Fed’s rate hiking cycle and the Atlanta Fed estimates 1^st quarter GDP at a 2.1% growth rate. Fed Chairman Jerome Powell remains hopeful that current interest rates are restrictive enough to bring inflation rates down to 2% without causing serious pain in the US economy. Although inflation rates have steadily come down, there has been an uptick in some commodity prices recently including oil, which has increased in price 14.63% year-to-date.

Another factor that may affect the economic outlook is the housing sector. Existing home sales have risen in 2024 so far as mortgage rates have also settled under 7% since the end of December. However, mortgage applications have not risen in kind, suggesting that the recent surge in home sales may be driven by cash offers by wealthier buyers or investors. There may be a pent-up demand that could be released once rates come down enough to entice buyers to buy and sellers to sell.

It is important to remember that a diversified investment portfolio can benefit from a broad market rally as we have seen recently. Trying to time the market and predict when an asset class will lead the way is not a long-term winning strategy for most investors. A better approach is to have a diversified portfolio that suits your risk tolerance and long-term goals.