The positive trends that we have seen in much of 2024 continued in March. This month marks the fifth consecutive month higher for markets. The economy remains resilient despite stubborn inflation, which led the Fed to keep rates unchanged.
Market
Stocks continued their march higher; however, unlike previous months, gains were spread across regions and capitalizations. U.S. large stocks rose 3.2% for the month to close out a 10.6% quarterly rally. Value stocks outpaced their growth counterparts by over 3%, finishing up 5% for the month. Small and mid-cap stocks joined the bull run and were up 3.2% and 5.6%, respectively. Foreign developed and emerging markets followed suit, up 3.4% and 2.5%.
The broadening was also seen in other markets. The U.S. bond market posted a modest 0.5% increase as yields retreated on longer-dated bonds. Commodities also popped with oil up over 5% and gold prices rising to a record high of $2,200/oz. Bitcoin was also in the headlines, briefly surpassing $70,000. If all of that wasn’t enough, cocoa prices surged to record highs due to severe weather.
Economy and the Fed
The economy continued to surprise analysts. Consumer spending and gross domestic product (GDP) rose in March. Inflationary pressures persisted as the Consumer Price Index (CPI) rose 0.4% for the month, and 3.2% for the year. Producer prices rose 0.6%—more than double what most analysts were expecting. It was no surprise that the Federal Reserve left interest rates unchanged at 5.25-5.50% for the fifth consecutive meeting. They did, however, update their interest rate projections which led to the market expectation of three rate hikes by year end. Jerome Powell also indicated that they now expect GDP to be 2.1% for 2024, from their precious estimate of 1.4%.
Looking Ahead
Dating back to 1950, a strong first quarter has generally led to a positive outcome for the rest of the year 94% of the time. It is also worth noting that a presidential election has generally been positive for the market, regardless of who is the winner.
March was a positive month for both markets and the economy. The Fed’s dovish revisions and continued economic strength led to broad-based market gains. However, inflation remains a concern, and the Fed’s future decisions will be closely watched in the coming months.
