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Global Equity Markets

The first quarter in 2024 was another win in the books for equity investors.

The MSCI global stock index increased by 7.7% in the first quarter. This is the single largest quarterly gain of the decade thus far.

Here are some selected returns in the equity markets:
On February 22, 2024, the Japanese Nikkei 225 finally
beat its closing high of December 29, 1989.
As has been so often the case for the last 15 years, US stocks outperformed as well.

The S&P500 was up at least 1.59% for every month in the quarter. In fact, stocks were up 1.59% in both November and December as well. Over the last 120 years, the only other time the stock market was up 1.59% every month from November through March was the five months ending in March 1961.

In case you are wondering, back in 1961 stocks continued to climb another 11.6% over the next
eight plus months. This is bullish.

Getting back to the first quarter of 2024, the S&P500 finished up 10.2%. This was the second consecutive quarter of double-digit gains. It was only the eighth time the S&P500 has seen double digit gains two consecutive quarters in a row. In all seven previous instances, the bull market continued for at least another 16 months and extended gains by at least 32% before a bear market kicked in. This certainly presents a bullish case for the equity markets.

Global Credit Markets

Argentinian and Pakistan bonds were the big winners in the first quarter with both returning more than 25%.

As for the United States, most bonds did not fare as well. Investment grade bonds lost 0.8% while long-dated Treasury bonds lost 3.1%.

Bucking the trend, junk bonds gained 1.7%. Spreads tightened as recession fears continued to fade.

In fact, high yield spreads are in the 7.7% percentile (i.e., they are low) of all historical readings. So, you really are not getting compensated properly for investing in risky bonds at this point.

While interest rates have most definitely come up from their December 2020 lows, they are still a bit lower than average.

Long Term Baa Investment Grade Corporate Bond yields clocked in at 5.75% which is the 43 rd percentile in terms of absolute yields. That is a bit lower than their 105-year historical average of 6.81%.

Interest rates just seem high because we were used to unusually low rates for a long time.

Meanwhile, the financial media continued its strange obsession over when the Fed would cut interest rates.

Consider this

From May 17, 2000 to Oct 9, 2002, the Federal Reserve cut interest rates 11 times and raised interest rates zero times. The stock market return was -46% over this time.

From September 17, 2007 to March 9, 2009, the Fed cut interest rates 10 times and raised
interest rates zero times. The stock market’s return was -54% over this time.

In the four years ending on March 31, 2024, the Federal Reserve cut interest rates zero times
and raised interest rates 11 times. The stock market’s return was 103% over this time.

Perhaps the financial media should revisit their assumptions of what drives the stock market.
Neil Jesani CFP, Andrew Constantinides IAR, Jacob McCue CFA, Michael Foulkes, Christopher Rose, Nikhil Khandelwal CFA, Sofiya Shoiab Esq.


Commodities had a great first quarter.

Usually after a big spike in commodities, they crash (1948,1951,1980, 2008, 2011).
There was a big commodity spike from 1972-1974. But commodities didn’t really crash
afterwards. Instead, commodities spent the next few years just churning around and slowly
working off their overbought condition.

There was a big commodity spike from 2020-2022. Are commodities acting the same way as
they did in the mid 1970’s?

It is certainly something to mull over.

Meanwhile, to the delight of precious metal enthusiasts everywhere, gold hit numerous all-time highs in the first quarter.

We will finish this report with the quiet unsung star of the first quarter of 2024.

Cocoa went up 132% for the quarter.
The closest analog to the current rally is the 1976-1977 move. Cocoa peaked in 1977 and then
proceeded to go into a 23-year -85% bear market.

And if you thought the Nikkei 34-year drought of new highs was bad…cocoa didn’t break those 1977 highs until 2024 as well. That’s a 46-year drought of new highs.

The moral of the story here is to enjoy the spectacular rallies but be mindful of potential risks as well.

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