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2024 First Quarter Investment Report


Best Start to a Year Since 2019

 

Global stock markets kicked off 2024 on a high note, delivering solid returns across major indexes. The rally extended beyond US large-cap technology stocks, with financials and energy-related equities posting gains of +12.4% and 13.5% respectively. However, notable shifts occurred as Apple and Tesla faced double-digit declines, altering the landscape from the "Magnificent 7" to the "Fabulous 5."

 

This upward trend reflects growing optimism for sustained economic growth and reduced concerns about an impending recession. The Federal Reserve Board contributed to this sentiment with a generally dovish tone and optimistic outlook on inflation.

 

Despite a strong 2023, the continued upward trajectory in recent months was somewhat surprising. Anticipating the lagged effects of monetary policy, many expected a slowdown in economic activity and a loosening of the employment landscape. While tempting, extrapolating the recent large market gains into the future is not something we should get too accustomed to. Instead, we can acknowledge a robust quarter while maintaining cautious optimism for the near future.

 

As previously discussed, the delayed impact of tighter monetary policy is likely to manifest in slower growth, a softer labor market, and lower inflation, potentially leading to declining bond yields.

 

Money market rates remain attractive, offering yields exceeding 5% annually, a factor that shouldn't be overlooked.


How The Markets Did Last Quarter?

 

Equity markets demonstrated resilience, defying pessimistic expectations with a strong start to the first quarter. Specifically, the S&P 500 rose by +10.5%, the Russell 2000 Small Cap Index by +5%, Developed International (EAFE) by +6%, and Emerging Markets by +1.9%.

 

Fixed income was more challenging and posted mixed results. The short end of the yield curve offered marginally positive returns as coupon payments offset price declines, while intermediate U.S. Treasuries finished down -1.3% and long-term U.S. Treasuries finished down -3.7%, reflecting their greater price sensitivity to changes in interest rates.

Following market upswings, investors often exhibit emotional responses such as increased risk-taking or fear of missing out. As J.P. Morgan once said, "Nothing so undermines your financial judgment as the sight of your neighbor getting rich." With that said, it might be prudent for long term buy and hold investors to proceed with a little more caution. For investors with risk exposure near the upper end of their acceptable risk range, I’d recommend notching allocations down a little with the idea of waiting to see how things play out over the coming months.

 

As long term investors, we are never completely in or out of the market but rather take a balanced approach. Pressing bets when the probabilities are in our favor and retreating on the margin when things appear over extended is the blueprint we follow. Markets generally do not move up in a straight line, however history has shown the cost of being out of the market is too great a burden for the smart money to bear. The questions investors must consider are what target return I hope to achieve and how much risk shall I accept to achieve my goal.

*****

 

Enclosed are your investment reports and advisory invoice notification for the last quarter.  Please don’t hesitate to contact us for a discussion on our investment strategy for the upcoming quarter.  Thank you for your continued trust and confidence.





Sincerely,

Justin Kobe, CFA

Founder, Portfolio Manager & Adviser

Pacificus Capital Management









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______________________________________________________________________________________ Advisory services through Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker-dealer, member FINRA/SIPC. Cambridge and Pacificus Capital Management are not affiliated.

Material discussed is meant for general illustration and/or informational purposes only, and it is not to be construed                                    as investment, tax, or legal advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon when coordinated with individual professional advice. These are the opinions of Justin Kobe and not necessarily those of Cambridge Investment Research, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.

Investing in the bond market is subject to risks, including market, interest rate, issuer credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies is impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and the current low interest rate environment increases this risk. Current reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed. Diversification and asset allocation strategies do not assure profit or protect against loss.

Indices mentioned are unmanaged and cannot be invested into directly. The S&P 500 Index is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. The Russell 2000 Index is a stock market index that measures the performance of the 2,000 smaller companies included in the Russell 3000 Index. The MSCI EAFE Index is designed to represent the performance of large and mid-cap securities across 21 developed markets, including countries in Europe, Australasia and the Far East, excluding the U.S. and Canada. The Index is available for a number of regions, market segments/sizes and covers approximately 85% of the free float-adjusted market capitalization in each of the 21 countries. The MSCI Emerging Markets Index is a market capitalization weighted index comprised of over 800 companies’ representative of the market structure of the emerging countries in Europe, Latin America, Africa, Middle East, and Asia. Prior to January 1, 2002, the returns of the MSCI Emerging Markets Index were presented before application of withholding taxes.

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