First Quarter 2024 Market Commentary and Current Economic Update

The new year started with strong stock market returns, with the S&P 500, Nasdaq, European Stoxx 600, and Japanese Nikkei indices all making new record highs during the quarter. The broad MSCI All Cap World Index (MSCI ACWI) returned 8.2% for the quarter.

As we roll into the year’s second quarter, the focus continues to be on inflation, economic strength, and the Fed’s interest rate actions. Inflation has proven “stickier” than traders expected at the start of the year, as the central bank seeks balance. As our portfolio managers at East Bay Investment Solutions put it, “While many economists still expect inflation to eventually hit 2%, it is also expected to be a bumpy ride.”

Positive Signals

• It was a strong quarter for investor returns; MSCI ACWI gained 8.2% over the quarter.
• US large-cap stock index returns are being driven by more than just the Magnificent 7, indicating a broader rally.
• Hope for a soft landing remains; the Fed still anticipating three interest rate cuts in 2024.

Reasons for Concern

• Inflation remains elevated; headline CPI and PCE are higher in February vs. January; expect a bumpy road toward targeted 2% inflation levels.
• Many geopolitical risks lurk in the background (war in the Ukraine and Middle East, 2024 is a presidential election year in the US).
• The Chinese economy is still challenged; impacting emerging market investments.

As always, the economy is unpredictable. There are positive signals along with reasons for concern, as outlined below. Click here for their full report or follow this link for a recorded presentation.