As we enter April, the markets and economy are showing mixed results for the first quarter of 2024. March saw most financial markets up in the low single digits, but overall, the quarter was a bit more mixed. While the U.S. and developed nation stock markets performed well and set new price records, fixed income lagged as interest rates rose. This reflects the broader economy, where growth and inflation are both still present.
Despite some signs of a slowdown in consumer and business confidence, there are no immediate signs of an impending recession. Job growth remains strong, income and spending are positive, and business investment continues. The economy has continued to grow in the first quarter, with no imminent threats to its stability.
Inflation remains a concern, with both headline and core inflation levels remaining above the Federal Reserve’s target. Although there has been some improvement, the Fed cannot declare victory over inflation just yet. However, market expectations on rate hikes have aligned more closely with the Fed’s projections, which should help limit future volatility.
Beyond rates, there are other risks to watch in the coming months. The effects of the war in the Middle East on supply chains may push inflation levels back up, and uncertainty surrounding the upcoming election could increase overall market uncertainty. Unforeseen events, such as the collapse of the Key Bridge in Baltimore, could also impact supply chains and pose real risks to the economy.
Looking forward, the U.S. economy is continuing to grow, especially in terms of job creation, providing a solid foundation for the markets. Corporate earnings have exceeded expectations and are expected to keep growing. With markets adjusting their expectations for inflation and rate hikes, a significant source of uncertainty has been removed. After a strong first quarter, momentum from 2023 is expected to continue into the rest of the year, positioning the economy and markets in a positive light for the foreseeable future.
