VIEW: Stocks have seen one of their historically strongest starts to the year. And performance began to healthily broaden from the US and tech. But S&P 500 is annualising at overdone levels and seeing the first signs of over-exuberance. Markets are overdue for pullback. But this will be bought and should not be feared even as positive seasonality tailwinds ebb. With twin earnings growth and rate cut pillars in place, and cash on the sidelines. Q1 earnings season is the April highlight and first of the three Q2 drivers, to be followed by rate cuts and the ramping election season. April also see’s the Bitcoin 4-yr halving and start of voting in world’s largest democracy.
MARCH: S&P 500 rose 3% in March, topped and tailed by MU and LULU. Taking the Q1 gain to 10% and annualising over 40% that would make the best since 1954. Crypto led asset classes again. Stock performance broadened as Europe and Japan stocks outpaced US. The focus switched from Q4 earnings surprise to dovish central banks. With SNB the first developed central bank to cut, the Fed dot plot keeping 3-cut outlook, and BoJ historic hike likely one-and-done. The dollar was firm and Japan verbally intervened in JPY. US 10-year yields eased to 4.2%. Brent hit a 4-mth high $85/bbl. whilst cocoa soared to twice prior all-time-highs.
APRIL: Second quarter has three big drivers: earnings season, interest rate cuts, and elections. April brings the first with reassuringly low Q1 earnings season expectations at +5% in US and Europe’ -10%. And AGM proxy voting season is accelerating to its May peak. The macro focus is the US inflation and Q1 GDP health checks, and the IMF/WB spring meetings get-together. Crypto focused on Bitcoin’s halving and spot inflows. Plus political drama from Pres. Trump’s first criminal trial and the start of India’s election. Markets may also fret about the looming end of six months of positive seasonality, and the first signs of investor flows FOMO over-exuberance.
All data, figures & charts are valid as of 27/03/2024.