The U.S. stock market surged in the first quarter of 2024 (Q1), once again led by the S&P 500 Index. The index notched 22 new highs in the quarter, increasing by 10.2%. Mega cap technology stocks led the charge with NVIDIA (NVDA), Meta Platforms Inc. (META), Amazon.com Inc. (AMZN), and Microsoft Corporation (MSFT) appreciating by 82.5%, 37.2%, 18.7%, and 11.9%, respectively. However, a deeper analysis reveals that the Q1 2024 large cap rally was broader than it appeared at first blush. For example, the S&P 500 Equal Weight Index was up 7.4% in the quarter, trailing the performance of the market cap weighted index by just 277 basis points.

International stocks lagged their U.S. counterparts with the MSCI World ex USA Index yielding a return of 4.6%. In advanced economies, Japan’s export-oriented stock market and European equities hit unprecedented levels, buoyed by the Japanese Yen’s prolonged weakness and optimism surrounding
advancements in healthcare. Emerging market returns trailed those of developed international markets, with the strengthening dollar dampening the substantial gains witnessed in Taiwan, Korea, and India. Meanwhile, China’s ongoing economic difficulties translated into underwhelming market results.

The most recent Federal Open Market Committee’s (FOMC) projections for rate cuts imply three 25 basis point rate cuts by the end of 2024, down from market expectations of six 25 basis point cuts at the end of 2023. Consequently, after outperforming the S&P 500 Index in Q4 2023, the small cap Russell 2000 Index took a breather, appreciating by a comparatively lower 4.8% as expectations of a “higher for longer” interest rate environment took hold.

Bond yields remained relatively range bound during the first quarter with 10 Year Treasury yields ranging from 3.86% to 4.34%. From a performance perspective, the Bloomberg Aggregate Bond Index fell by 0.77% in the quarter as changing rate cut expectations and rising yields exerted downward pressure on prices.6 The biggest losses came from long-term bonds, which tend to be more sensitive to changes in interest rates and interest rate expectations.

On the commodity front, the price of Brent Oil increased by 18.2% during Q1 2024 due to tightening global supply and better-than-expected economic growth in the U.S. and China. Perhaps not surprisingly, energy was the second best performing sector in the S&P 500 Index during Q1 2024, increasing by 12.6% during the quarter.