April 2024 Market Perspective

Continuing their rally from February, all three major stock indices rose in the month of March. The S&P 500 saw a 3.1% gain, while the Dow Jones Industrial Average and the Nasdaq rose 2.1% and 1.8%, respectively. Having gained steam in recent months, the Russell 2000, a small-cap index, stocks led the way with a 3.2% gain. Coming off a successful 2023, growth stocks slowed as value stocks outpaced for the month. International and emerging markets stocks saw nice gains in March, with the MSCI EAFE and MSCI Emerging Markets indices ending the month up 3.4% and 2.5%, respectively. 

With a strong March finish, all major indices performed quite well for the first quarter of 2024. The S&P 500 led the way with a 10.2% return, while the Nasdaq and Dow Jones Industrial Average rose 9.1% and 5.6%, respectively. International stocks also continued their good start to the year, with developed stocks up 4.95% and emerging markets up 2.37%.

Bonds continued to struggle due to investor fears that interest rate cuts would be prolonged or even pushed to next year. Although bonds were positive for the month of March, with the Bloomberg U.S. Aggregate Bond Index (Agg) up 0.92%, the Agg was down 0.78% for the first quarter.

The Federal Reserve (Fed) announced at the conclusion of their March 19-20 meeting, the second of the year, that they would maintain the federal funds rate at their current range of 5.25-5.5%. This marks the fifth consecutive meeting that monetary policymakers have decided to hold interest rates steady and keep rates at the highest range in 22 years. During his press conference following the conclusion of the meeting, Fed Chair Jerome Powell stated, “the Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”

Confidence that inflation is moving towards the Fed’s 2% goal fell dramatically with the release of the March 2024 Consumer Price Index (CPI) report. The reports showed headline inflation had increased 0.4% for the month and 3.5% year-over-year, both higher than analysts’ estimates. A day later, the Producer Price Index (PPI) came back hotter-than -expected as well. PPI, a measure of inflation at the wholesale level, increased 0.2% for the month, which was less than the 0.3% estimate from the Dow Jones consensus. However, PPI saw its largest 12-month increase at 2.1%, indicating pipeline pressures that could keep inflation elevated.

Following the release of March’s inflation reports, analysts have now pushed the probability of rate cuts to the Fed’s September meeting. As of this writing, the CME FedWatch Tool is predicting a 71.5% chance of at least a 25-basis point decrease in September.

Despite some recent good news on the economic front with jobs rising more than expected and the unemployment rate dropping slightly, investors will continue to focus on the Fed and comments made by Fed governors and members of the Federal Open Maret Committee (FOMC) for indications about the path forward for monetary policy.