U.S. Markets
Stocks posted solid gains in the first quarter as enthusiasm about artificial intelligence, signs of a soft landing, and dovish talk from the Fed buoyed investor confidence.
For the quarter, the Dow Jones Industrial Average rose 5.62%, the Standard & Poor’s 500 Index gained 10.16%, and the Nasdaq Composite picked up 9.11%.1
Rocky Start in January
Stocks saw modest gains in January as positive economic data (retail sales, gross domestic product [GDP] report) and upbeat Q4 corporate reports helped offset a mixed inflation update. As expected, the Fed kept rates unchanged at its January meeting. The more neutral language used by the Fed led some to believe the Fed was concerned about inflation and might be slow to adjust rates. That news took the wind out of stocks’ sails, curtailing gains for the month.2
Building Momentum
In February, stocks regained some momentum as investor enthusiasm surrounding artificial intelligence overshadowed the Fed’s next move with interest rates. By mid-month, investors’ attention shifted to any company offering an artificial intelligence update in its quarterly report.
Marching Onward
Mostly positive economic news in March—including strong but moderating GDP growth, steady unemployment, and decelerating inflation—propelled stocks. All three major averages set record highs during the month.3
At its March meeting, the Fed left rates unchanged and signaled its inclination to cut interest rates three times this year—each time by a quarter of a percentage point. Markets rallied to new highs following the news, which led to the S&P having its best first-quarter performance in five years.4
What Investors May Be Talking About in April
The Fed opens its two-day meeting on April 30, and investors can expect the Fed to look closely at the drivers of inflation. The Fed will examine each component of the Consumer Price Index, which measures the prices of consumer goods and services across more than 200 categories.5
In January, more than two-thirds of the CPI’s 3.1% was driven by the category called shelter, which includes rent prices. Shelter was sticky again in February and has been one of the most stubborn areas for some time.6
The Fed will be watching shelter and other key categories to see what’s driving inflation as it evaluates whether to adjust short-term rates at some point this year.
We Are Here for You
At Patriot, we will continue to focus on what we can control – asset allocation, costs, and having a plan. We consistently communicate the importance of diversification through low-cost index funds, reasonable withdrawal rates, and not trying to time the market. These three variables are critical in the success of one’s financial plan. If you want to review your allocation or your goals, we are a phone call or e-mail away.
- WSJ.com, March 31, 2024
- WSJ.com, January 31, 2024
- CNBC.com, March 28, 2024
- CNBC.com, March 28, 2024
- BureauofLaborStatistics.gov, 2024
- CNBC.com, February 13, 2024
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