Statement Letter 2024 April
When it comes to investing, investors rarely experience the average. Take the long-term return of the stock market for example, it averages around 10 percent per year. A statistic you may find interesting is that during 92 of the last 98 years, markets did not return the average.
During the first quarter of 2024 the stock market experienced a year’s worth of average returns (~10 percent). Does this mean we should sit on the sideline for the remainder of the year? History suggests no. Highs in market prices alone do not signal an imminent market decline.
Strong market performance, in the first three months of 2024, came on the heels of strong economic data, including higher-than-anticipated economic growth in 2023. The jobs market, with unemployment at historic lows, has also provided a foundation for increased consumer spending.
Market breadth has been on the rise. Breadth gives us an idea of how many stocks are participating in a market uptrend or downtrend. Rising breadth, as seen in Q1, has historically been a sign of a healthier market.
During the first quarter, gains in the U.S. stock market were led by communication services and the energy sector. Commodities gained 10%, supported by the increase in energy prices and precious metals, like gold. The broad U.S. bond market declined by -0.80%, in large part due to the increase in interest rates during quarter.
Inflation has recently shown signs of acceleration, prompting the Fed to extend its timeline for interest rate cuts. Their decision reflects a commitment to tempering inflation while supporting economic growth. We continue to believe that rate cuts in 2024 or early 2025 are still on the table.
At Vector, we believe that rising stock market values can present opportunities for healthy rebalancing, including the funding of short-term withdrawal needs. We aim to top off the short-term investment segment, we call Assured Income, during market highs. This routine practice is used to offset the need to sell investments, especially those intended for the long term, at otherwise inopportune times.