Like a wilting flower, some of the bloom came off of the “Magnificent 7” during Q1 2024. Though Nvidia (NVDA) and Facebook (META) continued their phenomenal performance during Q1, the rest of the crowd came back to earth – and even struggled – with Tesla and Apple dropping -29.3% and -10.8%, respectively! As the broad capital markets became more comfortable with the state of the U.S. economy, the S&P 500 (IVV) reached new all-time highs during the quarter and ended Q1 up +10.42%. However, similar to previous rallies over the past few years, diversifying asset classes like small- and mid-cap U.S. equities and international and emerging market equities have lagged, but this time by a narrower margin.
Though many imbalances remain in the U.S. economy, like housing affordability and pockets of unemployment, concerns about the U.S. economy are subsiding as inflation has fallen close to the Fed’s 2% target and growth remains strong. Global tensions, however, are a crucial backdrop to market performance as the Russia/Ukraine and Israel/Hamas wars continue to cast uncertainty on the markets due to threats of supply chain disruptions and oil supply shocks.
Per the table above, we can see that most markets continue their recovery from the depths of 2022, with the S&P 500 (IVV) taking the crown for best performance. Equity performance continues to be dominated by the “growth” story such that stable and mature companies, such as those in the dividend-payer space such as DVY, have not kept pace. Fixed income has been a troublesome area with weak returns as the inverted yield curve works to right itself; long-end yields may rise as short-end yields may fall.
During Q1, I wrote blog posts featuring bitcoin, Nvidia and hydrogen; themed assets that are very topical with idiosyncratic profiles. Though these all have potential for extraordinary return, they also have extraordinary risk per my blog post, Now What? A Futurist View:
D&A believes in long-term strategic investing to help investors achieve their goals consistent with their time horizon, risk tolerance and special considerations. The views of Cathie Wood are compatible with our philosophy as we both have a long term time horizon. A fully diversified exposure to US and global equities will allow investors to capitalize on this view without adverse idiosyncratic risk exposure.