April Markets

Ok let’s face it, with double-digit positive returns for most investment classes in 2022 and a roaring first quarter for this year, we were overdue for a little breather and last month markets took a little break. On a positive note, a look deeper into the numbers shows that movements were really about market rotation vs negative sentiment. What’s “rotation,” you ask? Well, maybe “pivot” is a better word. Remember the prior month's positive returns being driven higher by a select few “Big Tech” names? Does the “magnificent 7” ring a bell? Markets moving higher driven by the momentum of just a few companies is described as being “narrow”.

While positive returns are a good thing, normally, narrow markets typically widen out with  broader growth participation . Investment dollars begin to seek out those great companies who are unappreciated in spite of their positive attributes. That shift or “broadening” can at times skew the numbers, markets can go lower while money takes profits and moves on to the “next thing”. A shift from a high “growth” company focus to where there is more “value” or more room for growth in the next phase. The good news is it’s a positive sign and the better news is it’s a trend in the “short term” and investors within actively managed funds with long-term objectives will have more opportunities for profit. On a broader view, markets are still fixated on expectations of dropping interest rates and that will dominate the market's daily mood swings going forward.

What’s the Big Picture Economic View?

• What’s The Big Picture? Despite a strong economy, the federal reserve is debating cutting rates in 2024 - translation… a Soft Landing

• Markets are Poised to Potentially Move Higher Momentum in the index has become broad based and bullish; 71% of S&P 500 constituents are trading above their 200-day moving average

• The U.S. is Experiencing a Mid / Late Cycle Expansion

• Earnings Expected to Be Up in 2024

• This Resilient Economic Expansion Has Been Supported By Consumer spending

• The Labor Market Has Continued to Remain Strong

• Labor Has Become More Productive Higher productivity allows the economy to run hotter without higher inflation

• The U.S. Fed is Discussing When Rate Cuts Should Begin A conditional dual mandate: Policy Rate has peaked and is expected to move lower

• The target inflation rate of 2% is a journey, not a sprint, this last mile will be challenging

• Canada is tied to the U.S. in many ways and pre-empting rate cuts will weaken the loonie