Quarterly Trading Report – Q1 2024: Ch-Ch-Ch-Ch-Changes in Rate Expectations

Executive summary:

  • Stronger-than-anticipated economic data released during the first quarter led to a significant downward shift in market expectations for 2024 rate cuts.
  • While equity markets were mostly unfazed by this change in expectations, fixed income markets experienced increased levels of volatility during the quarter.
  • The exchange rate between the U.S. dollar and the Japanese yen hit a 34-year high.

Markets started the year anticipating several U.S. Federal Reserve (Fed) rate cuts in 2024, but by the end of the first quarter, a continued string of stronger-than-anticipated economic data readings led to a significant dialing-down of expectations.

Equity markets were largely unfazed by the shift, generally climbing anywhere from 5% to 10%, depending on the region. It was a different tale in fixed income markets, however, with heightened volatility throughout the quarter as markets recalibrated their expectations for Fed policy. Meanwhile, in foreign exchange markets, the delay in rate cuts helped further boost the U.S. dollar’s strength, while derivatives markets established first-quarter records for average daily volume for U.S. Treasury futures and options.

At Russell Investments, our 35-plus years of experience executing trades for a wide range of institutional clients affords us unique and valuable insights into today’s market trends and insights. We trade approximately $2.3 trillion annually through our multi-venue trading platform, and maintain a 24-hour global trading desk with access to over 100 countries across all asset classes. Here are key observations from the first quarter of 2024.