In March, the markets experienced favorable conditions, with the Nasdaq gaining 1.79%, the Dow Jones falling (0.20%), the S&P increasing by 3.08%, and the TSX gaining 3.76% for the month. The year-to-date performance was good for the indexes.
As detailed in our earlier investment outlooks, as we have outlined before, we are now solidly in a new bull market. I would like to highlight the following:
• A new bull market does not mean a straight line up as there will be pullbacks, but the trend is higher, and we anticipate the trend to continue higher for the rest of 2024.
• The S&P 500 is up 10.15% in Q1 and whenever it rises at least 8% in Q1, the S&P 500 averages a gain of 9.7% for the rest of the year and finishes the year higher 94% of the time. This indicator bodes well for the rest of the year’s performance.
• Volatility readings in the markets have remained low for an extended period, looking at historical comparisons, with select low readings not seen since the early nineties. We would expect volatility to pick up at some point during the year as these indicators could remain persistent before volatility picks up again. This low volatility is occurring as the market is going higher. At some point we will see a more material pullback resulting in increased volatility, which is normal.
• We anticipate the markets to continue rising throughout the year, with stronger gains expected in the second half of the year. This year being a presidential election year, it has historically been positive for the markets.
• Any rate cuts in the second half of the year will further boost the markets. The only caveat is that rate cuts are not expected to be driven by a significant recession, which we do not foresee in 2024. In our opinion, the current US economic conditions do not warrant interest rate cuts and we believe the Fed is reluctant to reduce rates.
• There are still healthy amounts of doubt that the market will continue higher, which is a good sign for further increases.
• We are beginning to see the market broadening as reflected by the S&P Mid-cap 400 and the Russell 2000 indexes gaining traction.
In summary, we maintain a constructive outlook on the market and expect the market to continue higher for the rest of the year with pullbacks along the way and increased volatility at times. The US presidential election this year could bring some surprises.
