Clearview Portfolio Consulting April 2024 Market Recap

Key Points:

  • US stocks fell from all-time highs during April and declined for the first time in 5 months.
  • Higher than expected inflation data caused investors to adjust the number of interest rate cuts for 2024.
  • Geopolitical tensions outside the US have global investors concerned, decreasing the appetite for risky investments.

After 5 consecutive months of positive gains, stocks retreated in April as investors continued to re-evaluate interest rate cuts from the Federal Reserve.  The US economy slowed a bit during the first quarter of the year with GDP growth of 1.6%, missing economists 2.5% expectations.  Despite the slowdown in growth, inflation continues to remain sticky with CPI increasing 3.5% year over year in March.  The elevated inflation measure saw higher price increases for shelter, motor vehicle insurance and gasoline.  With inflation above the Fed’s 2% target, expectations for aggressive rate cuts this year are waning.

The S&P 500 (-4.08%), Dow Jones Industrial Average (-4.92%) and NASDAQ Composite (-4.38%) all dropped during April.  Utility stocks (+1.65%) were the only sector of the market in positive territory.  Real estate (-8.5%) and Technology (-5.43%) were the hardest hit sectors as interest rates moved higher and tech valuations appeared rich.  Small caps fell 7.04% as measured by the Russell 2000.  Smaller companies tend to have less financial flexibility and higher for longer interest rates makes financing more burdensome and access to capital more limited. 

Outside the US, geopolitical tensions in the Middle East and the ongoing conflict in Ukraine have weighted on investors’ appetite for risk.  Oil prices and gold moved higher after attacks by Iran and Israel escalated the situation.  European and Asian equities dropped during the month while emerging markets were flat.  The US Dollar has strengthened this year as the flight to quality and higher for longer expectations on interest rates have attracted foreign investment.

The bond market fell in April as longer dated Treasury yields moved higher.  At the start of the year the bond market was pricing in 5-6 quarter point interest rate cuts to the Fed Funds rate.  Now that expectation has dropped to 1 cut with some economists predicting no cuts for 2024.  The Bloomberg US Aggregate Bond Index fell 2.53% in April as inflation weighed on real yields.  30-year mortgage, car loan and home equity loan rates moved higher which may weigh on economic growth in the coming quarters.  Slower economic growth could lead to lower inflation and a soft landing in the US economy assuming the labor market remains healthy.

Sources: Morningstar Direct, Guggenheim Investments, Bureau of Labor Statistics, Wall Street Journal