A look at Year-to-Date returns

The First Quarter 2024 earnings reporting season is largely completed, and the picture is reasonably sound. The chart below depicts year-to-date returns for the major market averages. Stocks are up, with the S&P 500 Index leading the way followed closely by the NASDAQ Composite index.? The large company DOW Industrials Index and the small company Russell 2000 Index are up, but materially lagging due the effect of not owning tech and AI stalwarts as compared to the leading indexes. The loser so far are bonds, with the Bloomberg Aggregate Index posting negative returns so far this year.

These price charts above are a good depiction of the economic backdrop as well as the company-level operating fundamentals at play today. The S&P and the NASDAQ are leading because their top holdings are replete with the dominant mega cap tech stocks that are riding the AI wave. The DOW and Russell are lagging because of their relative paucity of exposure to such things. The Agg is down because rates are being maintained by the Fed as the inflation problem persists. Bonds are giving back returns logged in the forth quarter of 2023 that were made in what now clearly proved to be are far too optimistic expectation for many rate cuts in 2024. As we said in January, the strength of the economy and persistent inflation problem simply didn’t (and still doesn’t) justify rate cuts.

Looking ahead, we think the S&P and Nasdaq are a little ahead of the fundamentals, which has created higher valuations. The indexes will need earnings of their constituent companies to come through to move higher. On the other hand, the Russell and the Dow probably have some more room to run, but their ability to deliver earnings will also be the primary consideration. Based on Wall Street earnings expectations, the second and third quarter earnings reports will be the critical factor in determining whether the market breadth many want and need will be delivered. We at WealthPlan are of the view the odds favor a broadening of earnings growth into segments of the market that have so far been lagging. As for bonds, we are still cautious so long as the yield curve remains inverted and inflation persists.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which Investment(s) may be appropriate for you, consult your financial advisor prior to investing. Information is based on sources believed to be reliable, however, their accuracy or completeness cannot be guaranteed.

No investment strategy can assure success or completely protect against loss, given the volatility of all securities markets. Statements of forecast and trends are for informational purposes and are not guaranteed to occur in the future. All performance referenced is historical and is no guarantee of future results. Securities investing involves risk, including loss of principal. An investor cannot invest directly in an index.

The NASDAQ Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market. The composition of the NASDAQ Composite is heavily weighted towards information technology companies.

The S&P 500 Index, or Standard & Poor's 500 Index, is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. The S&P 500 index is regarded as one of the best gauges of prominent American equities' performance, and by extension, that of the stock market overall.

The Russell 2000 tracks the roughly 2000 securities that are considered to be US small cap companies. The Russell 2000 serves as an important benchmark when investors want to track their small cap performances versus other sized companies. The Russell 2000 tends to have a larger standard deviation in comparison to the S&P 500.

The Dow Jones Composite Average is a stock index from Dow Jones Indexes that tracks 65 prominent companies. The average's components are every stock from the Dow Jones Industrial Average, the Dow Jones Transportation Average, and the Dow Jones Utility Average.

Indices are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only and do not represent the performance of any specific investment.