US Markets
Stocks notched 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 Q1
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 averages set record highs during the month.3
At its March meeting, the Fed left rates unchanged and signalled 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.
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.6
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.7
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.
World Markets
The MSCI EAFE Index rose 5.06% during the first quarter on signs that the European Central Bank and others were considering cutting short-term rates.
In fact, Switzerland’s Swiss National Bank cut its main policy rate in late March.8
In Europe, Spain (+9.63%), Italy (+14.49%), Germany (+10.39%), the United Kingdom (+2.83%), and France (+8.78%) all posted gains for the quarter.9
Pacific Rim markets also trended higher, with Japan (+20.63%) and Korea (+3.44%) leading.10
The Fed
The Fed left rates unchanged in the first quarter.
After its January 31 meeting, the Federal Open Market Committee used more neutral language in its policy document and indicated a subtle shift from considering rate cuts to proposing they could be possible unless inflation became a concern.
However, they cautioned that cuts weren’t automatic and would only consider them if inflation dangers had abated.20
At the March meeting, the Committee also left rates unchanged but signaled its inclination to cut interest rates three times this year.
That was a positive surprise for some investors who worried about the Fed’s commitment to adjusting rates.21
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1. WSJ.com, March 31, 2024
2. WSJ.com, January 31, 2024
3. CNBC.com, March 28, 2024
4. CNBC.com, March 28, 2024
5. SectorSPDR.com, March 28, 2024
6. BureauofLaborStatistics.gov, 2024
7. CNBC.com, February 13, 2024
8. MSCI.com, March 31, 2024
9. MSCI.com, March 31, 2024
10. MSCI.com, March 31, 2024
11. CNBC.com, January 25, 2024
12. BureauofEconomicAnalysis.gov, March 28, 2024
13. CNBC.com, March 8, 2024
14. FederalReserve.gov, March 15, 2024
15. Reuters.com, March 19, 2024
16. CNBC.com, March 21, 2024
17. CNBC.com, March 25, 2024
18. CNBC.com, March 12, 2024
19. Reuters.com, March 26, 2024
20. WSJ.com, January 31, 2024
21. WSJ.com, March 20, 2024
22. NYtimes.com, December 8, 2023
23. Womentalksports.com, December 27, 2023
24. Womentalksports.com, December 27, 2023
25. Olympics.com December 3, 2023
26. Olympics.com December 3, 2023
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