Equity markets capped a huge first quarter with a 3.2% gain in March on the S&P 500, with the 10.6% quarterly return marking the blue chip index’s strongest start to a year since 2019.
Smaller company stocks added another 3.6% in March for a 5.2% return year-to-date on the Russsell 2000 index.
Overseas stocks tacked on another 2.5% this month for a 3.8% return for the MSCI ACWI ex-US index this year.
Within fixed income, ten-year treasury yields ended the month flat after the Fed kept rates steady at their March meeting as expected. The Bloomberg US Aggregate Bond Index clawed back 0.9% in March but is still down -0.8% through the first quarter.
Commodity prices rallied back into positive territory during March, gaining 3.3% on the month for a 2.2% return YTD, while both gold and Bitcoin prices hit new record highs during the month.
Our proprietary Three Dials readings were unchanged through the end of the first quarter, as we outline below:
While much can be made of the frenzy around AI pushing markets higher, in reality the breadth around the current rally has been rather widespread, with traditional value sectors like Energy, Financials and Industrials all outperforming the broad S&P so far this year, while Real Estate is the only sector in the red year-to-date.
As such, our Momentum Dial remains in Positive territory through the end of the first quarter.
The Conference Board’s Leading Economic Index rose in February for the first time in two years, a sign that the economic uncertainty around persistently high interest rates and inflation is beginning to fade.
While we will closely monitor data from both the consumer and the manufacturing sector for confirmation that this month’s positive data will evolve into a trend, we keep our Fundamental Dial in Negative territory for now.
Stocks entered the year on the more expensive side, and the current rally has only expanded forward price-to-earnings ratios as investors bank on the future growth potential within the technology space.
While we remain well below the exuberance of the Dot Come Bubble, our Valuation Dial holds steady in a Negative position.
Our composite Three Dials reading remains in a Moderately Defensive position through the end of the first quarter, with two dials Negative and one dial Positive.
Sources: Morningstar