The first quarter continued the rally that began in October resulting in gains on the S&P 500 for Q1 2024 exceeding 10% and total return over the last12 months just shy of 30%. Gains continued to be disproportionately concentrated among a handful of large technology companies. In fact, four companies were responsible for almost half of the S&P 500 gains. Other indices that do not have such a high concentration of large capitalization technology names greatly underperformed the S&P 500. A case in point was the S&P600 small capitalization index which only gained 2.46% for the first quarter and the Dow Jones Industrial average which was up just over 5%.

November and December produced large gains in the S&P500 bringing Q4 2023 returns to 11.69%. As such, the index posted gains in all four quarters during 2023. It’s worthwhile to note that the S&P 500 equal weighted index was up roughly half as much (13.87% for 2023) as the capitalization weighted index. This was primarily due to the “Magnificent 7” stocks (Amazon,Apple, Alphabet, Meta Platforms, Microsoft, Nvidia and Tesla) which were up anywhere from 49% to 240%. As a group they amounted to roughly three quarters of the S&P 500 total gains. The top 10 stocks accounted for 90% of the S&P’s return. This just illustrates how little breadth we’ve seen which could make further rallies more difficult.

June was a big month for equity markets with the S&P 500index gaining 6.61%. As such, Q2 2023 produced a nice index gain of 8.74%, its third consecutive positive quarter. Dispersion among the indexes continued in Q2 as large capitalization technology stocks benefited the most. For example, the Nasdaq 100 index was up 15.16% during the quarter whereas the S&P 500 and Dow Jones Industrial averages gained just 8.74% and 3.41% respectively. Nevertheless, the S&P 500 ended the second quarter at a 14-month high.

March was a solid month for equity markets with the S&P500 index gaining 3.67%. Likewise, Q3 2023 produced a nice index gain of 7.50%,its second consecutive positive quarter. However, returns really depended on which market one was invested in as the Nasdaq 100 was up over 20% while the Dow Jones Industrial Average rose by just 0.38%. The biggest news for the quarter was the stability, or lack thereof, in the banking sector. The failure of Silicon Valley Bank was the biggest headline, which brought into question the strength of regional banks in general. Losses at Silicon Valley Bank and others were primarily due to the rapid increase in interest rates by the Federal Reserve.This resulted in bonds on the balance sheet experiencing unrealized losses, which turned into realized losses when the banks had to sell them to meet depositor withdrawals.

December was another challenging month for equity markets with the S&P 500 declining by 5.90%. Nevertheless, Q4 produced a nice gain of 7.08% resulting in year to date 2022 returns of -19.44%. This was the worst calendar year return since 2008. Fourth quarter returns were buoyed by headline inflation numbers which were tame enough to lead investors to believe the worst may be in the rear view mirror. In turn, investors believed that going forward, the Fed would be less aggressive with rate hikes as witnessed by the Fed’s final rate hike of the year being reduced from 75 basis points to 50 basis points. That said, there was some disappointment in the Fed’s guidance for its target Fed Funds rate coming in higher than expected which dampened December returns. On another note, strong corporate earnings in certain sectors provided a tailwind for stocks during the quarter. Fixed income returns for the quarter were mixed with corporate bonds outperforming government bonds. This was primarily due to a narrowing in credit spreads.

September was a challenging month for equity markets with the S&P 500 declining by 9.21%. This brought the Q3 return to a decline of 4.88% resulting in year to date 2022 returns of -23.87%. This is the worst start to a calendar year since 2002. Inflation, geopolitical risk, rising interest rates and the outlook for continuing Fed rate hikes were the primary headline drivers for the poor performance. Fed chairman Jerome Powell made it clear that the Fed is still targeting inflation of 2%.

June was an extremely difficult month for the market as the S&P 500 lost 8.25%, resulting in a 20% decline year to date and the worst first half of the year in over 50 years. The Nasdaq 100 declined 9% for the month for its worst first half of the year ever. The market experienced the bulk of its loss for the month in the first two weeks. It then had a rally only to fall back into month end. The U.S. dollar strengthened which exacerbated losses in overseas markets.

April was not kind to equity markets with the S&P 500 experiencing its worst month since the beginning of the pandemic. The S&P500 index declined 8.72% while the Nasdaq 100 lost 13.36%, its worst month since October 2008. The biggest headwind for the month seemed to be hawkish views from the Federal Reserve. The Futures market indicates that there is a 99% chance interest rates are within the range of 2.5-3.75% after the mid-December meeting. This would be the highest short-term interest rate in the US since 2008.

Equity markets climbed a wall of worry in March as the S&P 500 index posted its first positive month of the year. Continuing geopolitical tensions combined with stubborn inflationary pressures and rising interest rates provided plenty of concerns for investors. The Fed hiked short term rates by 0.25% for the first rate increase in three years. The Fed also raised their expectation for inflation and interest rates going forward resulting in an upward revision in market forecasts to nine rate hikes in 2022.

Escalating tensions between Russia and Ukraine finally resulted in a full invasion by Russia. While Ukraine grabbed the bulk of the headlines, the economy didn’t help performance in the equity markets. Thing ssuch as high inflation, oil pushing $100 per barrel and expected rate hikes by the Federal Reserve pushed prices lower through the first few weeks of the month. For the month the S&P 500 was down 2.99%, the Nasdaq 100 was down 4.64% and the Eurostoxx 50 dropped by 6%. Like January, equity markets were extremely volatile both during the month and intraday. For example, on February 24th, the S&P 500 was down nearly 3% at one point only to finish up 1.6% for the day. Having said that, an approximate 8% decline from the January highs still pales in comparison to the rise in excess of 100% from the March 2020 lows. Maybe a well-deserved correction is the extent of the decline but in the coming months, markets must still deal with rising inflation and interest rates as well as their affects on corporate earnings.

Equity markets were extremely volatile during the month. For example, the S&P 500 dropped 9.80% from the early January high only to rebound over 4% the last two trading days of the month to finish with a 5.86%loss. Likewise, the Nasdaq 100 dropped 15.48% from its late December high yet rebounded over 6% the last two trading days of the month to finish down nearly 10% for January. That made it the second worst January on record for the Nasdaq. Investors had a lot of news to digest including Federal Reserve interest rate hikes, inflation, and escalating tensions in Ukraine.

Equity markets were generally down for the month with the S&P 500 declining 0.69% and the Eurostoxx 50 losing 4.41%. Markets declined primarily toward month end propelled by hawkish comments from the Federal Reserve and the revelation of the new Omicron variant. Especially large selloffs occurred on Black Friday and the last day of the month. The selloff on Black Friday in particular resulted in a massive one-day spike in the VIX of over 50%. Investors were shaken by the Federal Reserve’s change in stance regarding inflation, effectively retiring the word “transitory” from their outlook. Specifically, Fed chairman Powell pointed toward a quicker tapering of asset purchases. More will be revealed during the Fed’s December meeting. A risk off appetite resulted in higher prices and lower yields for bonds.

Strong corporate earnings and economic tailwinds propelled the markets higher for October with the S&P 500 index achieving another record close. Consumer confidence remained elevated with significant demand for goods in the face of supply chain disruptions. As a result of demand outstripping supply, inflation continued to be an issue. Nevertheless, consumer sentiment was high, buoyed by a potent government spending package. The S&P 500 index was up 7% and the Nasdaq 100 index gained 7.3% as investors continued to buy any dips. Both indices climbed in near linear fashion especially from early October on. Bond yields generally rose as central banks indicated that they were prepared to remove accommodative monetary policy.

Equities finally took a respite in September with the S&P500 declining by 4.7%. September is historically, the worst performing month for stocks, so the decline was not completely unexpected. Investors were concerned over the systemic risk from the Evergrande crisis in China. Evergrande is a huge property developer and home builder that is close to defaulting on its billions of dollars of debt.

August was another strong month for equities with the S&P 500 gaining over 3%. Many indices including the S&P 500 reached new highs and August marked the seventh straight month that the S&P 500 posted gains. This is the longest streak since 2018. The bulk of the markets’ gains came at the beginning and end of the month with a decline around mid-month. Volatility declined during the month while choppiness was below average. Worries about the Covid-19 Delta variant, inflation and labor shortages were overshadowed by primarily dovish statements from the Federal Reserve. That said, the Fed’s comments pointed toward tapering later this year. Regardless, earnings exceeded expectations providing yet another tailwind for equities. In addition to earnings, many economic numbers were better than expected including job creation and unemployment which fell to 5.2%.

July was almost a mirror image of June as the S&P 500 index gained 2.38%. With the exception of a small downdraft at mid-month, the market rode a smooth uptrend and did not have a lot of chop. In fact, both market choppiness and volatility were well below average for the month. Equity markets climbed a wall of worry including growing concerns about the Delta variant, a sharp selloff of Chinese tech stocks and inflation concerns. The resurgence in Covid-19 cases continued to drive concerns that the recovery may be muted. However, at least for now GDP growth of 6.5% annualized highlighted a continuing hot economy. The Fed made no changes to monetary policy at its July meeting with Federal Reserve chairman Jerome Powell sticking to his script by assuring investors that the current inflation numbers are transitory.

Stocks continued their torrid pace with the S&P 500 gaining 2.3% in June, putting year to date performance at +15.25%. With the exception of a small blip in the S&P 500 at mid-month, markets rode a pretty smooth uptrend and had very little up and down chop. Inflation reared its head as the Consumer Price Index had its highest reading in nearly 15 years. The concerns were muted as most economists believe the high readings are transient. Markets were buoyed by ongoing Federal Reserve stimulus and a continued increase in Covid-19 vaccinations. The latter placed a focus on the potential for a full reopening to continue to drive economic growth.