April 2024 Market Recap

We are excited to share insights from the Wealth Management Investment Strategy Group (ISG).

April markets were driven by an important selloff in rates markets globally, where stronger than expected activity and perkier inflation data in the US led market participants to forecast fewer policy rate cuts this year.

Here’s a recap on what happened in the market and economy.

The markets: down on the month

Stronger than expected economic activity and inflation data drove stock and bond prices lower despite a relatively sturdy start of the first quarter corporate earnings in the US. The S&P 500 fell by 4.1% while the yield on the 10-year US Treasury note peaked at 4.74% in the final week of April.

The higher interest rates, however, supported the dollar – the US Dollar Index (DXY) index increased by 1.7% in April.

Stocks outside of the US saw mixed performance. Non-US and Canada developed markets fell by 2.5%, while emerging markets gained 0.5%.

The economy: mixed

US economic activity has slowed slightly from the rapid pace of the second half of 2023 but remains strong. The first quarter 2024 GDP grew by 1.6% quarter-over-quarter annualized, slightly lower than consensus expectations. Most of the slowdown in growth was driven by volatile inventories and net exports, even though consumer and business demand remained robust.

The US labor market continues to support consumer demand. The economy added 315,000 jobs (revised up from 303,000) in March but created only 175,000 new jobs in April. The unemployment rate changed little at 3.9% in April, but it is still near historically low levels. Wage growth remains strong even though the annual pace is declining. ISG expects more wage disinflation as there are emerging signs of loosening in the labor market.

Inflation surprised to the upside in the first quarter. ISG does not view this as any indication of sustained reacceleration, rather it is more stickiness in the “last mile” toward the Fed’s 2% target rate. Nevertheless, the data has led ISG to revise their Fed rate forecast for this year – dropping to two 25-basis-point rate cuts from four 25-basis-point cuts in 2024 and pushing the first cut to September from June.

What are we watching over the month ahead?

ISG is closely monitoring economic activity and inflation data across major economies and assessing the implications for global central bank policy. Additionally, ISG is keeping an eye on the global manufacturing sector, which has been showing tentative signs of recovery.