Chris Kamykowski, CFA, CFP® – Head of Investment Strategy and Research
Tim Side, CFA – Investment Strategist
Monthly Observations
Upward Momentum Continues for Markets
A resilient economy continued to support all markets with the labor market remaining
robust as the first quarter came to a close. The S&P 500’s 10.2% quarterly return
gave the index its second consecutive quarterly return exceeding 10% for the first time
since 2011Q4 – 2012Q1. Over the month, sustained growth has helped reduce
recession worries and buttress momentum in risk assets. March saw a clear change in
leadership as value-oriented equities outperformed growth significantly within both
large-cap and small-cap equities. Growth-oriented sectors, such as technology and
communication services sectors, while positive for the month, lagged value-oriented
sectors such as energy and basic materials. The latter two were helped by strength in
oil and commodities. Non-US and emerging markets performance was more
competitive to US markets with Mexico, Taiwan, Italy, and the United Kingdom
posting strong returns. Rates were largely range-bound which helped fixed income
markets. Stable rates also helped REITS and infrastructure finish higher on the month.
Dove-ish Tone by the Fed
March’s FOMC meeting saw interest rates hold at 5.25%-5.50%, with the Fed Chair
Jerome Powell leaving little doubt about his intent to start cutting rates in the not-too-distant
future. Worry over January and February inflation prints were regarded as
“bumps in the road” in the ongoing journey to disinflation.
End of an Era
A 12-year experiment with negative interest rates ended as the last holdout, the Bank
of Japan, moved its key policy rate back to at least zero. It raised rates for the first
time in more than 17 years, leading to a fresh post-pandemic low for negative
yielding debt. At its height, negative yielding debt hit $18 trillion, but that figure has
now shrunk to a mere ~$ 300 billion.
Commentary From Asset Managers
Private Credit Manager
With credit conditions easing as we move into 2024, leveraged credit investors are
optimistic that buyers and sellers in the M&A and leveraged buyout (LBO) market will
find a more balanced equilibrium and drive new issue supply upward. This optimism
is shared by credit investors in private and public markets alike.
Small Cap Equity Manager
Despite the recent headwinds, US small caps appear poised for a rebound. Going
back to the 1970s, small caps have traded at their current discounted level relative to
large cap during only one other period…. the “dot-com bubble” of the late 1990s.
International Developed Equity Manager
There are many reasons to believe that we may have entered a period of sustained
long-term performance from the Japanese stock market. Japan provides one of the
most attractive opportunities to be found anywhere in the world, especially with solid
corporate fundamentals, presence of positive inflation and the return of pricing power
for many Japanese companies.
Chart of the Month
DISCLOSURES
© 2024 Advisory services offered by Moneta Group Investment Advisors, LLC, (“MGIA”) an investment adviser registered with the Securities and Exchange Commission (“SEC”). MGIA is a wholly owned subsidiary of Moneta Group, LLC. Registration as an
investment adviser does not imply a certain level of skill or training. The information contained herein is for informational purposes only, is not intended to be comprehensive or exclusive, and is based on materials deemed reliable, but the accuracy of which has
not been verified.
Trademarks and copyrights of materials referenced herein are the property of their respective owners. Index returns reflect total return, assuming reinvestment of dividends and interest. The returns do not reflect the effect of taxes and/or fees that an investor would incur. Examples contained herein are for illustrative purposes only based on generic assumptions. Given the dynamic nature of the subject matter and the environment in which this communication was written, the information contained herein is subject to change. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. An index is an unmanaged portfolio of specified securities and does not reflect any initial or ongoing expenses nor can it be invested in directly. Past performance is not indicative of future returns. All investments are subject to a risk of loss. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. These materials do not take into consideration your personal circumstances, financial or otherwise.
SOURCES
Morningstar Direct as of 03.31.2024
Bloomberg as of 03.31.2024
Manager comments come from discussions with various asset managers and are broad commentary on sectors and not be considered recommendations by any asset manager. These comments do not necessarily reflect strategy allocations or the view or
opinion of MGIA or Moneta Group.
DEFINITIONS
The S&P 500 Index is a free-float capitalization-weighted index of the prices of approximately 500 large-cap common stocks actively traded in the United States.
The NASDAQ Composite Index is a market capitalization weighted index with more than 3000 common equities listed on the NASDAQ Stock Market.
The Russell 1000® Index is an index of 1000 issues representative of the U.S. large capitalization securities market.
The Russell 1000® Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.
The Russell 1000® Value Index measures the performance of those Russell 1000 Index securities with lower price-to-book ratios and lower forecasted growth values, representative of U.S. Securities exhibiting value characteristics.
The Russell 2000® Index is an index of 2000 issues representative of the U.S. small capitalization securities market.
The MSCI EAFE Index is a free float-adjusted market capitalization index designed to measure the equity market performance of developed markets, excluding the U.S. and Canada.
The MSCI Emerging Markets Index is a float-adjusted market capitalization index that consists of indices in 21 emerging economies.
Bloomberg U.S. Treasury Bond Index includes public obligations of the US Treasury, i.e. US government bonds. Certain Treasury bills are excluded by a maturity constraint. In addition, certain special issues, such as state and local government series bonds
(SLGs), as well as U.S. Treasury TIPS, are excluded.
The Bloomberg U.S. Municipal Index covers the USD-denominated long-term tax exempt bond market. It includes general obligation and revenue bonds, which both can be pre-refunded years later and get reclassified as such.
The Bloomberg U.S. Aggregate Bond Index is an index, with income reinvested, generally representative of intermediate-term government bonds, investment grade corporate debt securities and mortgage-backed securities.
The Bloomberg US Corporate Bond Index measures the investment grade, fixed-rate, taxable corporate bond market. It includes USD-denominated securities publicly issued by US and non-US industrial, utility and financial issuers.
The Bloomberg US Corporate High Yield Bond Index measures the USD-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch and S&P is Ba1/BB+/BB+ or below. Bonds from
issuers with an emerging markets country of risk, based on the indices’ EM country definition, are excluded.
The US Dollar Index measures the US dollar against six global currencies: the euro, Swiss franc, Japanese yen, Canadian dollar, British pound, and Swedish krona.
The FTSE Nareit All Equity REITs Index is a free-float adjusted, market capitalization-weighted index of U.S. equity REITs. Constituents of the index include all tax-qualified REITs with more than 50 percent of total assets in qualifying real estate assets other than
mortgages secured by real property.
The S&P Global Listed Infrastructure index measures the performance of global companies that are engaged in infrastructure and related operations. It provides liquid and tradable exposure to 75 companies from around the world that represent the listed
infrastructure universe. To create diversified exposure, the index includes three distinct infrastructure clusters: utilities, transportation and energy.
Brent crude is the most traded of all of the oil benchmarks, and is defined as crude mostly drilled from the North Sea oilfields: Brent, Forties, Oseberg and Ekofisk (collectively known as BFOE).
The Dow Jones Commodity Index Gold is designed to track the gold market through futures contracts.
The ICE BofA Option-Adjusted Spreads (OASs) are the calculated spreads between a computed OAS index of all bonds in a given rating category and a spot Treasury curve. An OAS index is constructed using each constituent bond’s OAS, weighted by
market capitalization. The Corporate Master OAS uses an index of bonds that are considered investment grade (those rated BBB or better). When the last calendar day of the month takes place on the weekend, weekend observations will occur as a result of
month ending accrued interest adjustments.
The ICE BofA Option-Adjusted Spreads (OASs) are the calculated spreads between a computed OAS index of all bonds in a given rating category and a spot Treasury curve. An OAS index is constructed using each constituent bond’s OAS, weighted by
market capitalization. The ICE BofA High Yield Master II OAS uses an index of bonds that are below investment grade (those rated BB or below).
Asset class valuations are a percentile ranking based on monthly data going back to common inception of 9/1/2006. The US Large Cap percentile is the average percentile ranking of the trailing P/E, P/B, P/S, and P/C ratio of the S&P 500 Index. The US
Small Cap percentile is the average percentile ranking of the trailing P/E, P/B, P/S, and P/C ratio of the Russell 2000 Index. The International Developed percentile is the average percentile ranking of the trailing P/E, P/B, P/S, and P/C ratio of the MSCI
EAFE NR Index. The Emerging Market percentile is the average percentile ranking of the trailing P/E, P/B, P/S, and P/C ratio of the MSCI Emerging Markets NR Index. The 10-Year US Treasury percentile is the percentile ranking of the 10-Year US Treasury
yield. The Investment Grade percentile is the percentile ranking of the ICE BofA US Corporate option adjusted spread. The High Yield Corporate percentile is the percentile ranking of the ICE BofA US High Yield corporate option adjusted spread. The
Municipal/Treasury percentile is the percentile ranking of the Bloomberg Municipal Index yield divided by the 10-Year US Treasury Yield.
