April Market Recap
Investors were prescribed a healthy dose of reality in April.
After five consecutive months of gains, the S&P 500 fell in three straight weeks last month. Volatility increased, as did the pace of inflation, which is creating some added anxiety.
All three major stock benchmarks lost at least 4%. The Dow Jones Industrial Average gave up all but a fraction of its year-to-date return. Of the 11 sectors in the S&P 500, only Utilities (+1.6%) were positive. Real Estate (-8.6%), Technology (-5.5%), and Health Care (-5.2%) suffered the most damage.
Benchmark Returns: April 2024 | YTD 2024
|
Dow Jones
|
S&P 500
|
NASDAQ
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-5.00% | +0.34%
|
-4.16% | +5.57%
|
+4.41% | +4.31%
|
|---|
The S&P sank 6% from its all-time high (March 28) to its April 19 low. It is the largest pullback for stocks so far this year and probably feels more painful given that positive returns have been so steady since late October.
That said, the April selloff is far less unusual than the 5-month, 28% rally that preceded it. In the last 96 calendar years (1928-2023), the S&P 500 has averaged 3-4 pullbacks of at least 5% yet only one 10% correction. Selloffs, in other words, happen every year and are part of the process for any successful long-term investor.
Federal Reserve Chair Jerome Powell remains in the spotlight despite the fact that the Fed has not adjusted interest rates since July 2023. The Fed again embraced patience last month, opting for no changes to the Fed Funds Rate (5.25% – 5.50%) following its April 30 meeting.
In his comments explaining why no rate cuts are imminent, Powell referenced the “lack of further progress” in recent months toward the Fed’s 2% inflation target.
The latest Consumer Price Index (CPI) showed 3.5% year-over-year inflation, up from 3.2% a month earlier and slightly worse than consensus forecasts. The most recent Personal Consumption Expenditures (PCE) data revealed 2.8% inflation from a year ago (up from 2.5% a month ago).
Inflation’s slight surge has some investors uneasy. In our view, however, Powell and the Fed are doing it right by practicing patience regarding rate cuts. Cutting too soon while the economy remains strong would risk re-igniting inflation and reduce the Fed’s future flexibility. Powell also addressed some especially hawkish concerns by stating, “It is unlikely the next policy move will be a hike.”
Bond yields increased significantly in April. Ten-year Treasury yields moved as high as 4.74% last week, the highest in six months. Two-year Treasury yields eclipsed 5% for the first time since November. The bond market is reverting back to its “higher for longer” outlook from last fall, which should make bonds more attractive to potential investors.
US GDP grew 1.6% annualized in the first quarter of 2024, based on preliminary numbers reported by the Department of Commerce. That is considerably slower growth than the 3.4% annualized we got in Q4 2023, but it’s not unexpected as the effects of higher interest rates filter their way through the system.
More than halfway through Q1 reporting season, corporate earnings have been relatively solid. Consensus estimates for all S&P 500 companies have been revised higher to 3.5% year-over-year growth, compared to just 0.5% as of a few weeks ago.
Small-cap stocks suffered through a dismal month. The Russell 2000 lost 7.1% as smaller companies tend to require more financing to achieve their growth targets. Higher interest rates mean more expensive loans.
International stocks weathered the volatility well. Non-US Developed equities fell 3.2% in April. Emerging Markets were down just 0.2%.
Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.
Marks Group Wealth Management performs in-house analysis on companies. Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings. The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice. Additional information is available upon request.
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Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets. No strategy assures success or protects against loss. Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.
Past performance is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.
The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.
Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price to-book ratios and higher forecasted growth values.
Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.
The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.
MSCI EAFE Index consists of the following developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.
VIX-The Chicago Board Options Exchange’s CBOE Volatility Index, a popular measure of the stock market’s expectation of volatility based on S&P 500 index options. It is calculated and disseminated on a real-time basis by the CBOE, and is often referred to as the fear index or fear gauge.
