Market Quote: U.S. Equity Market Performance Starts to Shift, Credit Markets Stay Solid
Author: The editor's desk
March 27, 2024
A mid-week analysis of what’s happening in global financial markets from the perspective of AGF’s investment management team.
Rotate This
Over the last few weeks, we have seen rotations in sector performance that are leading to a broadening out of equity markets. It may surprise some to learn that the Energy, Financials, Industrials and Materials sectors have the highest percentage of stocks trading above their 50-day moving averages in the S&P 500 Index. This is a drastic shift from last month, as breadth in the Technology and Communications sectors has drifted lower.
We believe these rotations will continue in 2024 as interest rates inevitably fall on cooling inflation and economic data. Whether the U.S. Federal Reserve (Fed) cuts two or three times this year is likely insignificant to U.S. equity markets. The bigger key is that yields are moving lower. We continue to see opportunities in areas that have lagged but could benefit from lower interest rates, including defensive sectors (Health Care, Utilities, Telecoms) and Technology Hardware & Software.
Rolling Credits
A surprise rebound in growth and inflation expectations, combined with a resilient labour market have supported the continued bid for corporate credit. This buoyant economic outlook, coupled with expectations of U.S. Federal Reserve (Fed) easing – and, by extension, a soft landing – continues to be a potential driver of solid performance across most credit asset classes ranging from high yield, investment grade, syndicated loans and hybrids.
A healthy economy bodes well for organic earnings growth and implied Fed cuts may keep debt service levels in check. We believe the structural outlook for credit remains bright for next quarter and the rest of the year.
*Dillon Culhane’s new role as co-portfolio manager is pending regulatory approval as of the date of this post.
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The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds, or investment strategies.
Commentary and data sourced from Bloomberg, Reuters and other news sources unless otherwise noted. The commentaries contained herein are provided as a general source of information based on information available as of March 27, 2024 and are not intended to be comprehensive investment advice applicable to the circumstances of the individual. Every effort has been made to ensure accuracy in these commentaries at the time of publication, however, accuracy cannot be guaranteed. Market conditions may change and AGF Investments accepts no responsibility for individual investment decisions arising from the use or reliance on the information contained here.
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