March 2024 Market Recap

We are excited to share insights from the Wealth Management Investment Strategy Group (ISG).

March was another strong month for equity markets with stocks hitting all-time highs in the US and strong returns from international and emerging market indexes. The Federal Reserve kept interest rates unchanged following its March FOMC meeting.

Here’s a recap on what happened in the markets and economy.

The markets: another month, another all-time high

In the US, the S&P 500 reached an all-time high and returned 3.2% on the month. Stocks outside of the US soared as well, with both international and emerging market stocks ending the month up 3.4% and 2.5%, respectively. Bonds saw more muted performance with a modest decline on 10-year US Treasury yields amid continued economic strength in the US, along with the market pricing fewer Fed rate cuts in 2024.

The economy: resilient

The US economy continues to power on as shown in the strong activity data released in March. Household spending remains a strong point, supported by improving consumer sentiment and a resilient job market. Still, signs of a slowing economy are beginning to emerge.

Although job gains beat consensus estimates in February, other indicators such as quits rate (which measures workers’ voluntary job departures) have eased and are now close to pre-pandemic levels. This is a sign that the labor market is gradually softening, which is also reflected in the slowly moderating wage growth.

March CPI (released April 10th) inflation surprised to the upside for the third consecutive month. ISG believes this points to stickiness in inflation rather than a sustained reacceleration. They forecast annual core PCE inflation hovering around 2.6% through the rest of the year.

As a result of these developments, ISG now expects the Federal Reserve to begin rate cuts in September (versus June previously), with 50 basis points of cuts this year.

Beyond that, ISG expects rate cuts to proceed cautiously at a quarterly pace to a terminal rate (the final interest rate that the Federal Reserve aims to achieve at the end of a monetary policy loosening or tightening cycle) of 3.25-3.5%.

What are we watching over the month ahead?

ISG is keeping a close eye on inflation data and labor market developments in the major economies. ISG is also focused on global manufacturing, which is showing some signs of recovery. If confirmed, it would further reduce the likelihood of a recession.