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April 2024 | Monthly Economic Update

Stocks sprang to new highs led by surprising economic resilience and strong corporate profits, while bonds experienced a modest downturn as interest rates rose after markets scaled back interest rate cut expectations.

Source: FactSet

Global equities kicked off 2024 with a bang. Within global equities, US stocks led the pack with 10.6% returns, its best quarter since 2019, and notched 22 new record highs along the way. Unlike 2023, the market rally broadened in 2024. In 2023, a narrow group of technology stocks, primarily tied to artificial intelligence, called the Magnificent 71, contributed nearly 60% of S&P 500 annual gains of 26.3%. In 2024, their contribution fell to 41% of the 10.6% gains, while the other 493 stocks contributed 59%2. In international equities, better-than-expected progress on inflation in Europe and a weaker yen, paired with optimism from corporate governance reform in Japan, led to new highs for European and Japanese stocks. The developed international region as a whole gained 5.9% for the quarter. While the US and developed international markets set new records, emerging market equities trailed with a 2.4% gain as strong gains in Taiwan, India, and Korea offset losses in China.

Within US markets, all sectors except real estate were positive for the first quarter. The market rally broadened as sectors beyond technology, such as financials, energy, and industrials, also enjoyed double-digit gains and outperformed the S&P 500 index, while defensive sectors, such as utilities and consumer staples, lagged.

Across size, bigger stocks did better and, within style, growth continued to outperform value. Large caps (S&P 500) rose by 10.6% and outperformed small caps (S&P 600), which only rose by 2.5%. This divergent performance can be attributed to the fact that the small-cap index has a lower weight of technology stocks. Finally, across style, the Nasdaq, a heavy growth and technology-oriented index, gained 9.3%, while the Dow Jones 30, a value-oriented index often synonymous with dividend payers, was up 6.1%.

Bond investors suffered modest losses as interest rates rose following scaled-back expectations for interest rate cuts. US bonds fell 0.8% in the first quarter of 2024. Lower quality bonds, such as high yield, were surprisingly resilient on strong fundamentals and gained 1.5%.

Finally, across other asset classes, commodities and gold gained while REITs fell. Gold, viewed as the ultimate safe haven asset, gained 7%, driven by increased purchases from central banks, rising concerns over geopolitical conflicts, and anticipated Federal Reserve interest rate cuts. Lastly, rate-sensitive REITs came under pressure and fell 1.3%.

1 Magnificent 7 group includes Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia, and Tesla.

2 JPMorgan. Bubble or bliss? Why we think stocks could grind higher. Data as of 3/26/24

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Maximize your tax efficiency by regularly reviewing your withholdings and deductions throughout the year, not just during tax season. This proactive approach ensures you optimize your financial strategy and stay aligned with ever-changing tax regulations.

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This is for informational purposes only, is not a solicitation, and should not be considered investment, legal or tax advice. The information has been drawn from sources believed to be reliable, but its accuracy is not guaranteed, and is subject to change. Investors seeking more information should contact their financial advisor. Financial advisors may seek more information by contacting AssetMark at 800-664-5345.

Investing involves risk, including the possible loss of principal. Past performance does not guarantee future results. Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss. Actual client results will vary based on investment selection, timing, market conditions, and tax situation.

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