Stocks took a breather in April after a strong first quarter, with the S&P 500 dropping -4% for its first monthly decline since October. The blue-chip index is up +6% year-to-date.
More volatile smaller company stocks slid -7% in April, with the Russell 2000 index now down -2% YTD.
Overseas stocks held up slightly better than their domestic counterparts, as the MSCI ACWI ex-US index declined just -2% on the month (+3% YTD).
Within fixed income, interest rates climbed as inflation data continued to prove stubborn, with the prospect of the Fed’s first rate cut being pushed even further out into the second half of the year. The Bloomberg US Aggregate Bond Index lost -2.5% in April and is down -3% in 2024.
Commodity prices continued to rally, with gold prices notching another monthly closing high in April. The Bloomberg Commodity index gained +3% for the month (+5% YTD).
Our proprietary Three Dials readings were unchanged through the end of April, as we outline below:
- Market Sentiment and Momentum: (Positive ➕)
After surging over 20% in the last six months, stocks were perhaps overdue for the pullback that we saw in April.
We’ll be closely watching the support level around 5,000 on the S&P, but for now the technicals remain well intact, and our Momentum Dial remains Positive.
- Economic Fundamentals: (Negative ❌)
April was a tough month for economic data, best encapsulated by the Q1 GDP release, where growth came in below expectations while inflation came in above expectations.
A low-growth, high-inflation combination is likely the worst outcome for markets, so for now our Fundamental Dial stays in a Negative position.
- Valuation: (Negative ❌)
With ten-year treasury yields climbing back above 4.5% for the first time this year, investors may be again tempted to dump their stocks in exchange for higher yielding bonds, putting pressure on already stretched valuations.
With Q1 earnings only expected to grow +3.5% year-over-year, our Valuation Dial remains in a Negative position.
Our composite Three Dials reading remains in a Moderately Defensive position through the end of April, with two dials Negative and one dial Positive.
Sources: Morningstar
Disclaimer: Our intent in providing this material is purely for informational purposes, as of the date hereof, and may be subject to change without notice. This article does not intend to constitute accounting, legal, tax, or other professional advice. Visitors and readers should not act upon the content or information found here without first seeking appropriate advice from a trusted accountant, financial planner, lawyer or other professional.
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