facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
This is not 2023  Thumbnail

This is not 2023

The stock market had a strong first quarter of this new year.  The S&P 500 Index logged a new all-time high of 5,000 points in late February and the Dow Jones Industrial Average is getting close to 40,000 points.   

But, it is increasingly evident that this is not 2023. Technology, communications and consumer discretionary stocks were the strongest performers in 2023.  All three sectors were down in March of 2024.   Changes in market leadership began to emerge among the industry sectors in February and by March the rotation to new leaders was evident.  The best performing sectors since February 1st are energy and basic materials. These have taken over leadership this year from the large cap growth stocks.  

In addition to industry sectors, we have observed a change in asset class leadership as well.  The four main asset classes are stocks, bonds, commodities and cash.  Commodities are showing strength after lagging stocks for more than a decade.   Gold usually leads a rally in commodities and that is no exception this year. After trading sideways for several years, gold surged to the highest price ever of $2,200 a troy ounce on March 8th.   

In the precious metals sector the price of silver is rising too, but it is not just a precious metals rally. The price of base metals is rising, including copper and steel.  Another commodity, crude oil, was up in each of the three months this year.  

The Federal Reserve Board continues to broadcast its intent to lower interest rates later this year in spite of persistent inflation.  As a result, many investors are factoring lower rates into their strategy for 2023.   Interestingly, the bond market does not appear to expect lower rates at this time.  The yield on the ten year and the five year US Treasuries started moving up in February.  On April 1st the yield on the ten year was 4.32%.  This is compared to 3.86% at the end of December.  Based on the response in the bond market, we think it is unlikely we will see rate cuts from the Federal Reserve anytime soon.  

Rising interest rates are challenging for technology companies and other large growth companies as we experienced in 2022, so it makes sense for those stocks to decline in price.  A rise in commodity prices is consistent with persistent inflation and higher interest rates.   

Following relative strength and identifying market leadership is important in forming an investment strategy for 2024.  It will be interesting to see how the year develops.  As the first quarter ends, the market does not look like 2023.

Written by Connie C. Guelich, CFP, AEP, CLU, ChFC. This represents our views at the time of this writing, and it is subject to change. It is not intended to be personal investment advice. If you would like to discuss your own account, please don’t hesitate to call us.