US stocks enjoyed another positive month in March, with major indices recording gains. The S&P 500 extended its winning streak, achieving its fifth straight monthly increase and marking new record highs. Notably, breadth improved, with the equal-weight S&P outperforming the official index. Small-cap stocks also demonstrated strength, with the Russell 2000 rising for the fourth time in five months.
There’s a pattern that has a good track record for forecasting the stock market’s yearly returns based on the first quarter’s returns. Usually, when the S&P 500 does not breach it’s December low (from the previous year) during the first quarter, the market goes on to have a good year. We did not break the December low, so that bodes well for 2024. Keep in mind that no predictive indicator, including this one, is right all of the time.
Among sectors, big tech, energy, banks, insurers, and other industries posted gains. Conversely, certain sectors, like electric vehicle manufacturers, lagged.
Bonds saw modest gains, with yields pulling back across most time periods. Meanwhile, gold and crude oil experienced notable upticks in price. You have probably noticed at the gas pump.
The focal point of the month was the Federal Reserve meeting in late March, where interest rates were left unchanged, as anticipated. The Fed’s projections for 2024 continued to indicate the possibility of rate cuts, though opinions within the committee varied. Economic updates remained mixed, with inflation readings drawing attention. The economy’s strength is largely unappreciated, even though it is reflected in higher prices for almost everything.
Despite some uncertainties, the overall market sentiment remained bullish, supported by factors such as ongoing Fed easing expectations, resilient corporate earnings, and continued enthusiasm around artificial intelligence.
Looking ahead, while short-term volatility may arise, the current momentum suggests potential for further market gains. However, cautious optimism is advised, considering factors like potential inflationary pressures and concerns about the market being overbought. According to a post on X by Bespoke Investments, the S&P 500 has been in overbought territory for 50 consecutive trading days. The last time the market had a longer streak was in April of 1998. I recall that despite a lot of volatility in late 1998, the market continued higher for 2 years after that streak. So, just because the market is high, or overbought even, doesn’t mean a crash is imminent. It does increase the likelihood of volatility though, in my opinion.
While there are always near-term challenges, the overall market trajectory remains favorable, with opportunities for growth and continued momentum. As always, staying informed, remaining adaptable, and aligning investment strategies with evolving market dynamics and your risk tolerance will be key to navigating the current landscape. And if you need a reason to stay invested, consider this: Over the last 30 years, the purchasing power of the US consumer dollar has been cut in half due to inflation. At the same time, the S&P 500 has gained 840% (7.8% per year) after adjusting for inflation, according to Charlie Bilello’s “The Week in Charts” from March 20, 2024.
Hopefully I don’t have to remind you, but tax day is coming up on April 15. Make sure you have filed a return or an extension by then. The same day is the deadline for making IRA contributions, Roth contribution, 529 plan contributions, and HSA contributions if you want them to count for 2023.
As always, these opinions are mine, and may or may not be the same as those of Raymond James. This is not a solicitation to invest, although we do invite you to review your portfolio with us to see if any changes should be made.
