As we head into the second quarter, it’s time to take a step back and evaluate how the equity markets performed in the first three months of 2024. While the S&P 500 showcased a surge of more than 10%, growth did not spread uniformly across sectors and markets. Let’s take a closer look.
U.S. large-cap indexes had one of their best quarterly returns of the last five years, but non-U.S. developed markets were not as strong. The MSCI EAFE index, which tracks developed markets outside the U.S., posted a modest increase of 5.7% in dollar terms. However, this number only partially captures the underlying strength of these markets. When adjusting for local currency, the return was closer to that of the S&P 500 at 9.6%. This means local equity markets in developed countries outside the U.S. were as robust as the S&P 500, but the strong dollar hurt U.S. investors in this index by about 4%.
Turning to emerging markets, the MSCI index only rose about 2.1%. The main detractor to performance was ongoing challenges in the Chinese equity market. China comprised over a quarter of the index and was down over 2%. On the brighter side, India and Taiwan carried forward their 2023 results into the first quarter of 2024 with positive returns of 6% and 12%.
Shifting our attention back to the U.S. market, the “Magnificent 7” have once again come under the spotlight for their outsized impact on overall market performance. While Nvidia and Meta continued their impressive runs in Q1 with returns of 82% and 37% respectively, not all Magnificent 7 stocks performed well. Apple fell 11%, and Tesla fell almost 30%. In a further departure from 2023, the first quarter saw an impressive breadth in positive returns. In the S&P 500, 7 of the 12 sectors had returns of 9% or more, with 383 of the S&P 500 stocks seeing positive returns.
As we turn the page on the first quarter and look ahead to the rest of the year , we believe the Fed will be successful in managing to a U.S. soft landing. With global growth expected to stay positive and central banks in the U.S. and Europe likely to shift toward cutting rates, the stage is set for a favorable market environment for equities.
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