March Market Recap
The Federal Reserve continues to preach patience on potential rate cuts and the stock market continues to go up anyway.
For the fifth consecutive month, all three major US equity benchmarks were positive. The S&P 500 and Dow Jones Industrial Average both ended March at record highs.
For the second month in a row, every sector in the S&P was positive. Energy (+10.4%) rallied the most. Utilities (+6.3%) and Materials (+6.2%) also enjoyed strong months. Consumer Discretionary (+0.01%) was nearly flat.
Benchmark Returns: March 2024 | YTD 2024
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Dow Jones
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S&P 500
|
NASDAQ
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+2.08% | +5.62%
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+3.10% | +10.16%
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+1.79% | +9.11%
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|---|
The S&P ended the first quarter up more than 10% year-to-date. It has gained nearly 28% since it’s late October low. Stocks have managed to keep rallying despite steady comments from Fed Chair Jerome Powell and others that no rate cuts are imminent.
The silver lining, which the market seems to realize, is that Fed cuts are being delayed because corporate earnings, job growth, and other economic measures remain strong. And this while inflationary pressures remain contained. Perhaps there are some Goldilocks themes taking hold in this stage of the cycle.
While equities may be overbought in the short-term, technically speaking, it’s encouraging that gains have broadened well beyond Technology. The Dow outperformed the NASDAQ last month. Defensive sectors (Energy, Utilities) took a turn leading the pack for a change. And small-caps delivered better returns than large-caps, as the Russell 2000 increased 3.4% in March.
The equal-weighted S&P 500 index also outperformed, gaining 4.5% last month and (finally) setting a new record-high on March 4, surpassing its previous highwater mark from January 2022.
Inflation has re-accelerated but only slightly. The latest Consumer Price Index (CPI) released on March 12 showed 3.2% inflation from a year ago, slightly worse than consensus forecasts. The fact that the S&P 500 gained more than 1% that day underscores that financial markets are no longer hyper-focused on inflation data.
The most recent Personal Consumption Expenditures (PCE) data showed 0.3% inflation compared to a month earlier and 2.5% from a year ago.
“I don’t think we really know if this is a bump in the road or something more,” Powell said on March 20 . “We’ll have to find out. In the meantime, the economy is strong.” The Fed’s own projections indicate they are still targeting three 0.25% cuts before year-end.
Bond yields ended March little changed from a month earlier. The 10-year US Treasury yielded 4.21% as of March 31. Bond markets as a whole have been relatively calm the last two months, which has added to investor optimism.
The US government revised fourth quarter GDP growth to 3.4% annualized (up from 3.2% previously) thanks to strong consumer spending.
International stocks had a good month. Non-US Developed equities gained 3.4% in March. Emerging Market equities were up 2.7%.
30-year mortgage rates fell below 7% in March, a welcomed sign for homebuyers.
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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.
