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Weekly Market Recap | 4/01/24

What happened last week

  • Holiday-shortened week ends 1Q 2024 – U.S. equities (S&P 500) rose over 10%, a strong (85 percentile since 1993) historical quarterly return.
  • Quarter-end rebalancing likely contributed to the outperformance of year-to-date laggards (e.g., small caps).
  • Monetary policy signaling from the Fed Chair and economic data did not meaningfully change interest rate expectations for 2024.

What we’re watching this week

  • Economic data: Friday’s non-farm payrolls report is expected to show another ~205k jobs added in March, with wages ticking modestly higher relative to February.
  • Price action: Monitoring for signs of a more durable trend change in favor of year-to-date laggards.
  • Fed: Speeches from Powell and Williams (NY Fed President) are the highlights.

Horizon’s Investment Management Views

Rotation was the story last week as we capped off a very positive quarter for equity markets with a relatively lackluster four days of trading. Small-caps, a significant laggard year-to-date, were the biggest beneficiaries, while markets saw little sponsorship. Zooming out, market breadth has temporarily broadened out from last year’s incredibly narrow price action. However, currently, we don’t see durable support for a “rising tide that lifts all boats” trade that would see the rest of the global equity market outperform the large-cap growth, quality, and AI-adjacent themes. First quarter earnings season will be an important test to see how investors react to the narrowing of the earnings tailwinds that software and semiconductor firms have enjoyed for the past year.

The economic data and speeches from Fed Chair J. Powell and Governor Waller didn’t change the picture for monetary policy – we are waiting for more data, but cuts are still coming this year. In terms of the impact to risk assets, the data was on balance, marginally positive. For now, good data is good for markets, until and unless we must start contemplating additional rate hikes. Back to monetary policy – interest rate expectations for 2024 remained unchanged on the week. At this point in the rate cycle, we think how the economic data evolves is much more important than the forecasts and the countless commentary of the members of the FOMC.

Looking to this week, Friday’s nonfarm payrolls report will take center stage. Continued labor market resilience coupled with modest (but not supercharged) wage gains would likely support risk assets in the short term. We are monitoring whether last week’s rotation into small caps hold or prove, as we expect, fleeting; we think quarter end rebalancing, in the absence of more tangible (and durable) catalysts, was the primary driver of last weeks’ rotation into year-to-date losers. Lastly, we turn to monetary policy – Powell and Williams (head of NY Fed) are the highlights.

Nonfarm payrolls are a monthly statistic representing how many people are employed in the US, in manufacturing, construction, and goods companies. They can also be known as non-farms, or NFP. FOMC= Federal Open Market Committee The commentary in this report is not a complete analysis of every material fact in respect to any company, industry or security.

The opinions expressed here are not investment recommendations, but rather opinions that reflect the judgment of Horizon as of the date of the report and are subject to change without notice. Forward looking statements cannot be guaranteed. We do not intend and will not endeavor to provide notice if and when our opinions or actions change. This document does not constitute an offer to sell or a solicitation of an offer to buy any security or product and may not be relied upon in connection with the purchase or sale of any security or device. Before investing, an investor should consider his or her investment goals and risk comfort levels and consult with his or her investment adviser and tax professional. Equities are represented by the S&P 500 Index which is a market capitalization-weighted index of the 500 largest U.S. publicly traded companies. References to indices, or other measures of relative market performance over a specified period of time are provided for informational purposes only. Reference to an index does not imply that any account will achieve returns, volatility or other results similar to that index. The composition of an index may not reflect the manner in which a portfolio is constructed in relation to expected or achieved returns, portfolio guidelines, restrictions, sectors, correlations, concentrations, volatility or tracking error targets, all of which are subject to change. It is not possible to invest directly in an index. This commentary is based on public information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. 

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© 2024 Horizon Investments, LLC. 

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