2024 Q1 Market Review
Leonard reviews Q1 markets and New Capital’s portfolio performance and covers topics such as inflation, the Federal Reserve's independence, bond yields, stock market volatility, valuations, and the impact of AI on technology.
Key Points
New Capital's portfolios performed well in Q1 2024, with strongly positive returns.
Stock market performance was very strong, and short-term bonds also did well; however, long-term bonds struggled due to unexpected interest rate increases. Nominal yields on the 10-year Treasury bond rose to 4.6%, while real yields were around 0.82%, below historical averages.
The global economy showed positivity, with high growth in India and stabilization in China, despite challenges in the euro area.
There is a Trump campaign proposal to reduce the Federal Reserve's independence, which is crucial for a stable economy.
US longer term bonds faced challenges, with a 3% decline in the US aggregate index year-to-date, while New Capital's bond portfolio performed better.
The stock market saw a 5% increase year-to-date in the S&P 500.
Large-cap growth and blend companies performed well, but small-cap companies struggled, and there is a very significant valuation concentration in the top 10 companies.
International stocks have lower valuations compared to the US, offering good returns potential, despite challenges.
AI's impact on the market and technology is significant and growing, with benefits such as increased trading volumes and streamlined administrative tasks.
Q1 Market Review Slides - from Dimensional Fund Advisors