2024 March Market Update

Equity markets continued higher in March as the S&P 500 Index posted its fifth consecutive monthly gain. Fairly positive economic data coupled with sustained constructive commentary from the Federal Reserve furthered the “soft landing” narrative that has buoyed stocks for most of the past year. All sectors in the S&P 500 posted gains this month, highlighted by leadership from some of last year’s laggards. The Index has now moved higher in five of the past six quarters, including back-to-back quarters of double-digit percentage gains.

More economically sensitive cyclical sectors (Energy, Industrials, and Financials) have outperformed this year, a sign that markets have, for now, moved past recession fears. This contrasts with the otherwise negative signals for cyclical stocks (most visibly the inverted yield curve) and demonstrates the potential peril of myopic focus on any one indicator. Despite media ascription of recent performance to a small number of stocks (as was the case last year with the “Magnificent Seven”), participation in the rally broadened during the first quarter. Roughly 83% of stocks in the S&P 500 finished March trading above their 200-day moving averages (a bullish momentum indicator), the highest level in over two years. More stocks reached 52-week highs than at any point in the past three years. Market action shows just how important it is to maintain proper portfolio balance and to not simply chase the hottest stocks of the moment. Analyst sentiment improved as well, with estimates for company earnings moving higher, in stark contrast to the gradual downward revisions experienced throughout much of the past two years.

However, the average individual investor may not have fully reaped the rewards of this upward move and positive sentiment shift. The past year has witnessed net outflows from stock funds and ETFs, with most of those assets moving into money market funds. While investors can always find reasons to avoid investing in equities and cash yields are certainly attractive, recent performance trends continue to demonstrate the value of staying invested. As we have repeatedly suggested - markets at all-time highs are not to be feared. What goes up does not necessarily have to come down. History has shown markets don’t revert to an eternally flat trendline, but rather have consistently marched higher over time.

Short-term oscillations and corrections, such as the pullback last summer, are both expected and healthy. We would not be surprised to see one or two selloffs this year, in line with historical averages, especially given the recent rapid rise in positive investor sentiment. While we make no claim to know all potential threats, it does seem that an uncomfortable resurgence in inflation would be the likeliest spook for markets. Although history has shown markets can move higher in various rate environments, historical returns tend to be lower than average in periods of rising inflation. We continue to posit that, for long-term investors, any stock weakness in the context of the recent uptrend presents more of a buying opportunity than a signal to sell.

Based on current valuations and other important metrics, many of the financial models now assume domestic equities (at the broad index level) will produce 4%-6% annualized returns over the next decade. If these forecasts prove to be even somewhat accurate, the yields currently available across the fixed-income landscape look increasingly competitive. For example, a laddered, investment-grade corporate bond portfolio can “lock-in” similar total returns to those equity assumptions for long-term investors that can hold bonds to maturity. The “higher for longer” positioning by the Federal Reserve has fortunately extended the buying opportunity for prospective fixed income investors to capture the highest yields in well over a decade. Who knows how long this opportunity will last should forecasted rate cuts finally manifest later this year?

In the final rush of tax season, we remind you to please keep us updated with any anticipated changes to your tax situation for 2024. It is never too early to get ahead of tax planning, and time is our friend as we seek to manage your portfolios best and most efficiently. As always, we wish a happy start to Spring and hope to hear from you soon!

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of the Wise Investor Group and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Investments mentioned may not be suitable for all investors. The companies engaged in the communications and technology industries are subject to fierce competition and their products and services may be subject to rapid obsolescence. Bond prices and yields are subject to change based upon market conditions and availability. If bonds are sold prior to maturity, you may receive more or less than your initial investment. Holding bonds to term allows redemption at par value. There is an inverse relationship between interest rate movements and bond prices. Generally, when interest rates rise, bond prices fall and when interest rates fall, bond prices generally rise. There are special risks associated with investing with bonds such as interest rate risk, market risk, call risk, prepayment risk, credit risk, reinvestment risk, and unique tax consequences. To learn more about these risks and the suitability of these bonds for you, please contact our office. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Past performance may not be indicative of future results.

An investment in a money market fund is neither insured nor guaranteed by the FDIC or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Bond Ladders are a time-honored investment technique, in which an investor blends several bonds with differing maturities, provides the benefit of blending higher long-term rates with short-term liquidity. Should interest rates remain unchanged, increase, or even decline, a laddered approach to fixed income investing may help reduce risk, improve yields, provide flexibility and provide shorter-term liquidity. Risks include but are not limited to: changes in interest rates, liquidity, credit quality, volatility and duration. Diversification does not ensure a profit or protect against a loss. Investments are subject to market risk, including possible loss of principal. Corporate Bonds are debt obligations of the issuing corporation.

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