As the first quarter of 2024 drew to a close, the broader markets continued their upward trajectory, driven by factors that caught investors off guard. Despite expectations of declining inflation, the Consumer Price Index (CPI) held steady at 3.2%, nearly unchanged from the beginning of the year. While some anticipated rate cuts, the Federal Reserve maintained its stance, signaling potential rate hikes in the future, albeit perhaps not as imminent as previously thought.

So, what fueled this rally? Firstly, it was a carryover from 2023, with the AI secular growth theme playing a significant role as a tailwind in Q1. Moreover, as the quarter progressed, breadth improvement aligned with a narrative of macroeconomic resilience. With the S&P 500 closing up over 10%, some may wonder if it’s time for a breather. However, historical patterns suggest otherwise.

Historically, when the S&P 500 surged by 10% or more in Q1, it has done so only 12 times, including 2024. The chart below illustrates the performance of the index in the subsequent months, including April, Q2, and the remaining nine months of the year, following each of these instances.

Although past performance doesn’t guarantee future results, in 10 out of the 11 instances mentioned, the market has experienced an upward movement, with an average return of 6.5% over the final nine months. While each year presents its own dynamics and market sentiment can shift, historically, such instances have often foreshadowed continued gains.

Leading Economic Index

After 23 consecutive months of decline, The Conference Board’s Leading Economic Index (LEI), offering early signals of significant shifts in the business cycle, saw a month-over-month increase in February. Although the rise in February was marginal, at 0.1%, any continuation of this positive trend in the LEI indicator could potentially bolster a bullish narrative for the stock market.

(Source: Carson Investment Research)

The chart depicted above illustrates the previous seven instances when the streak of declines in the LEI was interrupted, along with the ensuing returns in the stock market. Upon closer examination of the subsequent 12-month returns, there was only one occurrence of the market being lower. This happened in 2001, amidst the aftermath of the tech bubble’s burst, compounded by the impact of the 9/11 attacks, which triggered another downturn in the market.

Sell Side Indicator

As the markets continue their upward trajectory, Wall Street strategists are raising their equity allocation. The implication of this chart is that when Wall Street exhibits extreme bullishness, stocks often perform poorly, and conversely, when sentiment is less optimistic, stocks tend to fare better.

(Source: BoA US Equity & Quant Strategy)

While the uptick in equity allocations, rising by 22 basis points in March, is noteworthy, it remains within a historical range that is neither excessively bullish nor bearish. In contrast, the CNN Fear and Greed Index, a composite gauge based on sentiment-related factors for the US Stock Market, is signaling a more bullish or greedy sentiment. Both of these indicators serve as valuable tools for monitoring short-term trends, particularly if they become overly skewed in one direction or the other.

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Market Snapshot

For the Month Ending 3/31/2024 (Cumulative Returns)1   

1Source – Morningstar, Inc. Corporate Bonds is presented as the iShares iBoxx $ Investment Grade Corporate Bond ETF. Municipal Bonds is presented as the iShares National Municipal Bond ETF. High Yield Bonds is presented as the iShares iBoxx $ High Yield Corporate Bond ETF. 10 Year Treasury refers to the  valuation of a 10 Year Treasury Note, a debt obligation issued by the U.S. Department of the Treasury. Fed Funds Target represents upper limit of the federal  funds target range established by the Federal Open Market Committee. Inflation Rate provided for the purposes of this report by the U.S. Bureau of Labor  Statistics. Unemployment Rate calculated by the U.S. Bureau of Labor Statistics. WTI Crude Oil refers to the price of a barrel of West Texas Intermediate NYMEX) Crude Oil. Gold – Spot Price relates to the valuation of an ounce of gold, as traded on the NYSE Arca Exchange. U.S. Dollar refers to the U.S. Dollar  Index (DXY). All Returns are denominated in USD (United States Dollar), unless otherwise explicitly noted.

Did You Know?

The upcoming Paris Olympics in 2024 will make history by featuring breakdancing as an official sport for the first time. Known as breaking, this dynamic and acrobatic dance form will debut alongside traditional Olympic sports like swimming and track and field.

According to, the top favorites for the men’s breakdancing competition at the 2024 Paris Olympics are Canadian three-time world champion Phil Wizard and Japanese star Shigekix. Other well-known names include French b-boy Danny and Kazakh b-boy Amir.

Presented by the Investment Committee of Lake Street, an SEC Registered Investment Adviser

The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. This report is not intended to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. Diversification does not ensure a profit or guarantee against a loss. There is no assurance that any investment strategy will be successful. Investing involves risk and you may incur a profit or a loss.