The first quarter of 2024 continued to reward investors who stayed the course and enjoyed strong returns in 2023 as the momentum of 2023’s year-end rally took another step forward. Both equity and bond markets performed well after the Federal Reserve confirmed that disinflationary trends were consistent and satisfactory enough for them to finally consider monetary easing beginning this year. The S&P 500 experienced its best first quarter since pre-pandemic in 2019. All three major indexes had strong finishes, and both the S&P 500 and the Dow Jones Industrial Average (DJIA) closed at record levels for the first quarter.
For the quarter, the S&P 500 advanced over 10% and closed the quarter at 5,254. The Dow Jones Industrial Average finished the quarter at 39,807, adding over 5%. (www.investopedia.com; 4/1/2024)
The resiliency of the U.S. economy continues to be impressive. Still facing the dragging feet of inflation and a healthy workforce, the Federal Reserve has affirmed that rate cuts are anticipated this year, however, as of the quarter’s end we did not see the Fed reduce interest rates. During their March meeting, the Federal Open Market Committee (FOMC) maintained the federal funds rate of 5.25 – 5.5% but signaled that rate cuts were still on the horizon. Equity markets responded favorably to the optimistic news.
Inflation is still a major concern for investors and the Fed closely monitors the Consumer Price Index (CPI), which is a broad measure of goods and services costs. The CPI rose 0.4% in February and 3.2% from a year ago. The core CPI (CPI less food and energy) rose 0.4% for the month and was up 3.8% for the year. Energy costs increased 2.3%, which helped boost the inflation number. Gasoline, specifically, rose 3.6% in February and shelter costs, which remain high, increased 0.4% on a year over year basis. These two components accounted for over 60% of the monthly increase in the CPI.
KEY TAKEAWAYS:
- The Fed held their federal funds rate range steady at 5.25 – 5.50%, with no changes in the first quarter.
- Inflation for February came in at 3.2% compared to a year earlier.
- In March, the Fed indicated we may see three potential interest rate cuts in 2024.
- Several key factors could bring a possible market correction this year.
- Staying the course and maintaining the consistency of a well-devised, long-term focused plan has historically served investors well.
- We are here for you to discuss your unique situation.