Market Outlook

Q2, 2024: A New Bull’s Eye

Growth, Inflation & Policy

As of April 26, 2024

Stronger Economic Growth

  • While still negative, the Conference Board’s Leading Economic Index (LEI) is starting to recover, and the Conference Board no longer forecasts a recession in 2024.
  • There are further signs of stronger economic growth.
    • Final Gross Domestic Product (GDP) results confirmed that the U.S. economy remained strong throughout 2023. Fourth-quarter GDP growth was revised upwards from 3.2% to an annualized 3.4%, driven by personal consumption and government spending.
    • Manufacturing sector activity grew for the first time since October 2022, with an ISM Manufacturing PMI reading of 50.3 in March (a reading above 50 signals expansion in the sector).
    • The March ISM Manufacturing print broke the longest contractionary trend on record for the manufacturing sector.
    • The ISM Services PMI indicated ongoing expansion with a March reading of 51.4, marking 15 consecutive months of growth in the services sector.

Returns since Fed ‘Pivot’

  • On December 12, at the last FOMC meeting for 2023, Fed Chair Powell ‘pivoted’ when he acknowledged that the Fed would start cutting interest rates in 2024. The Fed’s economic projections show three rate cuts for 2024.
  • Heading into 2024, markets expected the equivalent of seven rate cuts for the year. However, strong economic data and stickier-than-expected inflation have led markets to now price in the equivalent of at most two rate cuts for 2024.
  • There has been a notable divergence in performance since the Fed ‘pivot’ on 12/13.
    • Risky assets, especially dollar hedges, such as bitcoin (+44.0%), gold (+20.2%), and crude (+16.2%) have been the top-performers, fueled also by other contributing factors, including rising geopolitical tensions and the deteriorating U.S. fiscal situation.
    • Interest rate-sensitive areas such as U.S. real estate securities (-4.3%) and regional banks (-4.7%) have lagged riskier assets as stronger economic data and sticky inflation have pushed out rate cuts (“higher for longer”).

For additional market insights, download our complete market outlook report.

This material is provided to advisors by Mount Yale Investment Advisors, LLC and contains market commentary from third-party sources it believes to be reliable. However, Mount Yale has not independently verified or otherwise investigated such information and makes no guarantee as to its accuracy or completeness. In the event any of the assumptions used herein prove not to be true, results may vary substantially. All investments entail risks. Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance. Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested indirectly. The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. It is not intended to be a client-specific suitability or best interest analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities.

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