March 2024 Market Review

Fidelity Bank – Wealth Management
March 2024
William J. Fennie III, CFA

Resilient economic data buoyed investors’ spirits during the first quarter of 2024. Confirmation of greater than expected 4Q 2023 GDP, a surprise expansion reading of ISM Manufacturing PMI (50.3) and macroeconomic data elsewhere around the world further supported the prospect of a resilient  economy in the face of higher global interest rates.

During the 1st quarter, US stocks advanced significantly with the S&P 500 up 10.56%. Concurrently, volatility remained subdued, with VIX Index, a benchmark for market volatility, hovering around an average of 14 throughout the period. While equity investors celebrated optimistic economic indicators, fixed income investors encountered a more demanding landscape.

Inflation persisting at higher levels, resilient economic performance, and a slight retreat by the Federal Reserve (Fed) from its dovish stance in December collectively contributed to the downturn in bond returns. This shift in the broader economic landscape was mirrored in the market’s anticipation of interest rate adjustments, where the expected number of rate cuts by the Fed in 2024 dwindled from six or seven cuts at the end of 2023, down to three cuts, beginning in the summer. As the likelihood of aggressive rate reductions diminished, the yield of the Bloomberg US Bond Aggregate Index climbed by 32 basis points (bps) over the quarter, resulting in negative returns of -0.78%.

Equity

The S&P 500 quarterly gain of 10.56% was led by High Quality Stocks (MSCI USA Quality: +12.81%) and Growth Stocks (Russell 1000 Growth: +11.41%). For March, the S&P 500 gained 3.22%.

Growth Stocks continued to lead Value Stocks in the 1^st quarter, outperforming by 2.43% (11.41% vs. 8.99%); however, Value Stocks led strongly in March gaining 5.00% while Growth gained only 1.76%. Small Cap stocks eked out a lead against their Large Cap brethren in March (3.29%) but with the same with Small Value (+4.38%) outperforming Small Growth (2.89%). For the quarter, Small Cap trailed Large Cap by 538 basis points.

From a Sector perspective, Energy Stocks were the best performing sector with returns of 13.55% for the quarter and strong March return of 10.57%. Real Estate Stocks were negative for the quarter, losing 0.55%. Despite headlines of troubles for regional banks, the Financial Sector gained 12.46% for the quarter.  

Developed Non-U.S. equities rose in March with MSCI EAFE gaining 4.00% in local currency and 3.29% in USD terms. While Emerging Markets gained in both local currency and USD terms with MSCI EM index adding by 3.02% and 2.48% respectively. Expectations for delayed and reduced Fed rate cuts have buoyed the US Dollar. Since the end of 2023, the US Dollar Index, which measures the US Dollar against other developed market currencies, gained 3.11%. This indicates a stronger dollar and weaker international currencies.

Japanese Equities continued a strong start to the year with the MSCI Japan Net Return Index rising 19.17% in local currency and 11.01% to finish the first quarter. Over the past year, Japanese equities are up 43.03% in Yen terms and 25.78% in US dollar terms.

Fixed Income

Since the end of last year, investors have materially repriced their expectations of when the Fed will cut rates. As such, short duration and spread sensitive fixed income assets advanced in the 1^st quarter with Treasury Bills and High Yield Bonds advancing 1.32% and 1.47%% while longer duration and rate sensitive assets such as Treasuries and Investment Grade Corporate Bonds fell 0.96%% and 0.40%%, respectively.

Real Assets

The Bloomberg Commodities Index sprung 3.31% in March with positive contributions from almost every subsector of the commodities complex.  WTI Crude rose 7.83% for the month and is up 17.70% for the quarter. The sell off in Natural Gas continued with the commodity losing another 11.84% in March. Year-to-date, Natural Gas is down by more than 28%.  Gold had a sharp rebound in March jumping 8.33%.

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March 2024 Market Review is intended solely to report on various investment views held by Fidelity Deposit & Discount Bank and is distributed for informational and educational purposes only and is not intended to constitute legal, tax, accounting, or investment advice. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. Fidelity Deposit & Discount Bank does not have any obligation to provide revised opinions in the event of changed circumstances. All data is provided by Bloomberg Finance, LP and Morningstar Direct. We believe the information provided here is reliable but should not be assumed to be accurate or complete. Data, if not otherwise noted, is as of 3/31/2024. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer or recommendation to purchase or sell a security. Past performance is no guarantee of future results. All investment strategies and investments involve risk of loss and nothing within this report should be construed as a guarantee of any specific outcome or profit. Investors should make their own investment decisions based on their specific investment objectives and financial circumstances and are encouraged to seek professional advice before making any decisions. Index performance does not reflect the deduction of any fees and expenses, and if deducted, performance would be reduced. Indexes are unmanaged and investors are not able to invest directly into any index. The S&P 500 Index is a market index generally considered representative of the stock market as a whole. The index focuses on the large‐cap segment of the U.S. equities market.

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