As we turn the page on the first quarter of 2024, we wanted to provide a recap of the market’s performance and highlight some key trends that may impact your portfolio in the coming months.

Mixed Signals: The first quarter presented a complex picture. Most economic indicators are trending in a positive direction, extending the current expansion. The Federal Reserve’s decision to continue the pause in interest rate hikes was a welcome development, and many anticipate potential cuts later this year. These factors fueled investor optimism for a corporate earnings rebound.

Market Performance: The S&P 500 continued its strong performance from late 2023, delivering returns close to 10% in the first quarter. This positive performance was likely fueled by optimism about a potential economic soft landing, where inflation is controlled without triggering a recession. The Canadian market, as reflected by the S&P/TSX Composite Index, lagged behind its U.S. counterpart. It experienced a more modest gain of nearly 5% so far in Q1.[1] This difference could be attributed to the Canadian market having a less concentrated presence of large-cap technology stocks, which were a major driver of growth in the U.S. market.

Shifting Tides: Looking ahead, the market is may to see a shift away from the dominance of large-cap technology stocks. The S&P 500, which is dominated by large-cap stocks, has handily outperformed the S&P 600, which is a useful barometer for the performance of small-cap stocks. This divergence could provide an opportunity in the small-cap space. We remain on the lookout for any opportunities to capitalize on a convergence between the two. Geopolitical tensions also remain a significant factor to watch, as they can influence supply chains, energy prices, and overall risk tolerance for investors.

Navigating the Landscape: Our team is closely monitoring these evolving market dynamics. We believe a diversified portfolio approach, including exposure to both small- and large-cap equities, fixed income, and alternative investments, remains crucial to weather potential volatility and capitalize on any opportunity that presents itself.

If you have any questions about anything written here, please feel free to reach out to our team. Remember, while uncertainty can be uncomfortable, don’t confuse a flickering flame with a dying fire—the market may sputter, but long-term investing is a marathon, not a sprint.

[1] Performance data source from LSEG WorkSpace (March 25, 2024)