That’s a wrap!

First Quarter 2024 Market Recap

The first quarter of 2024 is in the books. For the US Equity markets, it was the strongest first quarter since 2019. Immediately below is a chart of the major US Indices. We see the S&P 500 Index leading, and closely followed by the NASDAQ Composite Index. The Russell 2000 Index (Small Cap stocks) trailed in January but held its own in February and March. Bonds, as measured by the Bloomberg Aggregate Bond Index, were the clear loser, owing to a dramatic change in expectations for rate cuts from the Fed. As we wrote in January, the economy is strong, and inflation remains stubbornly fixed above three percent. We simply can’t see the Fed cutting rates while the economy is strong, and inflation persists above target.

There are still subtexts present in markets that are demonstrative of challenging forces for many of the strategies we manage. Below is a chart showing the S&P 500 Index (purple line) relative to: 1) the Equal Weighted S&P 500 Index, 2) The S&P 500 Dividend Aristocrats Index, and 3) The S&P 400 Dividend Aristocrats Index. The big takeaway is we are still dealing with mega cap dominance of market returns. We also note that dividend growth stocks continue to lag these mega cap stocks. The magnitude of their relative performance shortfall is somewhat smaller than last year, but we are still expecting this gap to narrow. The valuations of dividend stocks are compelling in comparison. We certainly witnessed a bit of a ”catch-up” in March, with S&P 400 Dividend Aristocrats exceeding the S&P 500 Index. Perhaps this is a harbinger of more to come. Perhaps.

Another area of note are the international stock markets. Below we show various segments of the global stock markets. Of particular note is Japan. After more than 30 years, the Japanese stock market has exceeded levels last reached in the late 19080s! Japanese stocks even exceeded the vaunted S&P 500 Index in the quarter. As this happened, Europe and Emerging markets lagged. China’s economy continues to be under pressure and its stock market continues to lag. We are evaluating potential moves into foreign markets but are in no hurry to do so. High on the list of research initiative for the next quarter is Japan.

In the meantime, rest assured we continue to actively manage the assets you have entrusted to our care. We continue to emphasize dividend growth, and strong competitive positions in the equity investments we make on your behalf. Our bond portfolios continue to be conservatively postured, emphasizing short duration and high-quality credit. We are waiting for clear direction on rates from the Fed before making substantial moves in our bond portfolios.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which Investment(s) may be appropriate for you, consult your financial advisor prior to investing. Information is based on sources believed to be reliable, however, their accuracy or completeness cannot be guaranteed.

No investment strategy can assure success or completely protect against loss, given the volatility of all securities markets. Statements of forecast and trends are for informational purposes and are not guaranteed to occur in the future. All performance referenced is historical and is no guarantee of future results. Securities investing involves risk, including loss of principal. An investor cannot invest directly in an index.

The S&P 500 Index, or Standard & Poor’s 500 Index, is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. The S&P 500 index is regarded as one of the best gauges of prominent American equities’ performance, and by extension, that of the stock market overall.

Equal-weight indices include the same constituents as their respective market-cap-weighted indices, but each company is allocated a fixed equal weight in the index at each quarterly rebalance.

The Russell 2000 tracks the roughly 2000 securities that are considered to be US small cap companies. The Russell 2000 serves as an important benchmark when investors want to track their small cap performances versus other sized companies. The Russell 2000 tends to have a larger standard deviation in comparison to the S&P 500.

The Bloomberg US Aggregate Bond Index (^BBUSATR) is used as a benchmark for investment grade bonds within the United States. This index is important as a benchmark for someone wanting to track their fixed income asset allocation.

The S&P MidCap 400® Dividend Aristocrats is designed to measure the performance of mid-sized companies within the S&P MidCap 400 that have consistently increasing dividends every year for at least 15 years.

S&P 500® Dividend Aristocrats® measure the performance of S&P 500 companies that have increased dividends every year for the last 25 consecutive years. The Index treats each constituent as a distinct investment opportunity without regard to its size by equally weighting each company.

The MSCI EAFE Index tracks large cap and mid cap companies in developed countries around the world. The index primarily covers the Europe, Australasia, and the Far East regions. This index is used as an important international benchmark. The index has had large drawdowns in 2003 and 2009, which were largely due to recessionary periods.

The MSCI Europe Index serves as a benchmark for European securities across various developed markets in the continent.

The MSCI Japan Index is designed to measure the performance of the large and mid cap segments of the Japanese market. The index covers approximately 85% of the free float-adjusted market capitalization in Japan.

The MSCI Emerging Markets Index represents securities that are headquarted in emerging markets. An emerging market is considered a country that has not yet become developed because of economic characteristics. These countries tend to present a unique investment opportunity because of the nature of their growth potentials.

The MSCI China Index captures large and mid cap representation across China A shares, H shares, B shares, Red chips, P chips and foreign listings (e.g. ADRs). The index covers about 85% of this China equity universe. Currently, the index includes Large Cap A and Mid Cap A shares represented at 20% of their free float-adjusted market capitalization.

Indices are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only and do not represent the performance of any specific investment.