I hope all is well with you. Stock market bulls were on parade during the first quarter of 2024, as the major U.S. stock indexes continued to extend gains from the final quarter of last year. 

With the books closed for the first quarter, I wanted to take this opportunity to offer an update on key developments.

S&P 500: Best Q1 Since 2019 

The S&P 500 found its way to its best first quarter since 2019, extending recent gains to a five-month win streak. 

The large-cap index and best gauge of the U.S. economy found strength early in the quarter via the AI theme, with NVIDIA contributing to the second consecutive positive quarter for the S&P 500. Some broadening into other sectors was a topic late in the quarter, with the energy and communication sectors finding buyers. 

Overall, for the first quarter of 2024, the S&P 500 increased by 10.16%, the Nasdaq 100 rose by 8.49%, and the Dow Jones Industrial Average saw a rise of 5.62%. 

Soft, Hard, or No Landing? 

Soft, hard, or no landing – the question remains whether the Federal Reserve will be able to pull off its inflation-fighting campaign without a recessionary impact.  

U.S. stock market bulls cheered the first quarter as investors gained more confidence in a “soft landing” (tamed inflation but no recession) amid inflation moderation. The prospect of perhaps “no landing” (no recession but persistent inflation) was also considered. Recent economic data since the end of Q1 add credence to the latter possibility.

Inflation Mixed for Q1 

Costs of goods and services are still rising annually, albeit at a slower pace than the peak of the recent inflation cycle. 

Metrics were mixed in the first quarter, with consumer inflation picking up in January (December data), easing in February, and then rising in March. 

The last Consumer Price Index (CPI) release of the first quarter showed a 3.2% rise year-over-year versus 3.1 % expected. Inflation is still running hotter than the Fed’s 2% target rate, but the market wants rate cuts. 

Labor Market 

Labor market resilience, based on government nonfarm payroll data, persisted throughout Q1. First-quarter data showed solid payroll gains (216,000 in December, 353,000 in January, and 275,000 in February) with all three months beating analyst consensus expectations. 

The data releases have been strong, indicating economic strength, but the initial figures are not quite conducive to the market’s desire for rate cuts. Downward revisions have come to the rescue somewhat.  

“Downward revisions” essentially means changes to the initial data releases in subsequent months. Data shows that the initial numbers have been revised lower for 10 of the last 12 months. 

Such revisions can help to bolster the case for Fed rate cuts, indicating a less strong labor market. 

Federal Reserve (Fed) Summary & Outlook 

The first quarter featured two Fed meetings, with the Fed leaving rates unchanged in January and March. The result is the same current target overnight lending rate of 5.25 – 5.50%, a 23-year high. 

While the Fed left rates unchanged at the most recent March meeting, the Fed did let us know that three 25-basis-point cuts are expected by the Federal Open Market Committee in 2024 via its Summary of Economic Projections (SEP). 

Markets loved Federal Reserve Chair Jerome Powell’s commentary at the post-meeting press conference, as all three major stock indices jumped to record high levels. However, on the last day of the quarter, Powell reiterated that the Fed needs to see more good inflation readings before it is ready to cut rates. This was further reiterated at Chairman Powell’s appearance earlier this week when he acknowledged that inflation and hiring have been firmer than expected this year.


What If the Fed Doesn’t Cut Rates?

Anything is possible. Market watchers were looking for six cuts; now, it has been whittled down to two or fewer for 2024. Yet, major U.S. stock indexes have risen while the number of cuts expected declined. 

Cutting rates with the economy running hot would defy conventional wisdom, and the “this time is different” narrative can be cause for concern for many veteran investors.  

It’s an election year, and the dynamics are multifaceted. We will see what future inflation and job data look like. 


Long-Run Planning

If you asked someone well versed in finance three years ago, “What would the stock market do if interest rates went from sub-1% to over 5% in three years”? 

Certainly, the overwhelming answer would have been for stock market declines during the rise in rates. These markets tend to defy conventional wisdom time after time; this is why long-term investing is a lifelong commitment with the fruits of time bearing themselves as a result of investor discipline. 


With the above quarterly recap noted, we would love to hear how things are going for you. If first-quarter market developments are on your mind, or if there is anything else we can help with, please feel free to reach out to your advisor—we are always here as a resource for you!

Be Well,

Andrew Fairman Signature

Andrew Fairman, CFA, CFP®

Chief Investment Officer