Financial markets picked up where they left off at the end of 2023, with a strong start to the year in the first quarter of 2024. Numerous U.S. equity benchmarks reached new all-time highs, led by the S&P 500 (large-cap stocks) which was up 10.2% in the quarter and is now up nearly 28% from its lows last November. Foreign stocks, as measured by the MSCI ACWI Ex USA index, were up roughly 4% during the quarter and the shares of smaller U.S. companies (Russell 2000) were up almost 5%. Gold was up 7.6%, U.S. oil prices rose 16%, and Bitcoin surged 65%. Whereas the rally in 4Q23 was due in large part to a dramatic shift lower in the yield curve on expectations of a dovish Fed pivot, the continuation of the rally in 1Q24 came despite the hawkish repricing of monetary policy. Markets began the year expecting roughly seven rate cuts for 2024; by the end of the first quarter expectations were lowered to three cuts amidst a backdrop of improving economic growth and sticky inflation. Bonds were one of the few asset classes that did not participate in this risk-on environment, as the yield on the 10-year Treasury bond rose over 30bps to 4.2% (bond prices move in the opposite direction of yields). The Bloomberg Barclays U.S. Aggregate Bond Index (the benchmark for U.S. bonds) generated a total return of -0.8% in the quarter, as the bond price decline more than offset one quarter’s worth of coupon payments…
