Q1 Market Update
Q1 2024 concluded on a high note in the markets, propelled by robust earnings and a resilient economy. The S&P 500 index gained another 3.1% in March, led by the Energy and Materials sector.
The US 10-year Treasury yield declined 5 basis points to 4.20% in the hopes of a near-term rate cut. However, not all of the “Magnificent 7” tech giants lived up to their name in Q1. While Nvidia surged 82% and Meta climbed 37%, Apple declined 11% and Tesla fell 30%.
The UK’s move to allow crypto-linked exchange-traded notes (ETNs) for professional investors was seen as a major boost for Bitcoin, propelling it to a new all-time high above $72,000.
The economic outlook remained strong, with GDP growing at an annual rate of 3.4% in the fourth quarter of 2023. This increase was primarily driven by rising consumer spending, state and local government spending, exports, and investment.
All eyes were on the Federal Reserve, where policymakers opted to hold interest rates steady in the current range of 5.25% to 5.50%. However, Fed Chair Jerome Powell assured the markets that rate cuts were coming, despite reports of hotter-than-expected inflation readings. The markets are now expecting only 3 interest rate cuts this year, a significant shift from the 5 cuts anticipated in January.
Q2 2024 Outlook:
Looking ahead to Q2 2024, the economic resilience continues to support the upward trend. However, some markets appear increasingly priced for perfection, and at least 3 rate cuts, meaning they may not be immune to profit-taking. The forward 12-month P/E ratio for the S&P 500 also trades at 20.9, above the 5-year and 10-year averages. Escalating geopolitical tensions and inflation stickiness can also create some market uncertainty.
While the markets are priced for a perfect scenario, which could mean limited upside, opportunities remain. Alphanso’s top-rated stock portfolio had another strong month, gaining 2.3% in March.
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Investors should remain selective and focus on high-quality companies with solid financial foundations and sustained elevation in earnings projections, as the market landscape continues to evolve.
Disclaimer: The returns provided are price returns and are derived from the actual model portfolio maintained by Alphanso since October 2022.
