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Over the first quarter of 2024, the Balanced Fund provided a return of +5.96% as global equity markets responded positively to the potential end of tighter global monetary policies. Over the past one year period, the Fund returned 16.92%.
In the middle of Q1, the International Monetary Fund (IMF) raised its 2024 outlook for global economic growth, with increases for both the US and China while the Eurozone is expected to slow to growth of just 0.9% this year. The UN financial agency cited inflation easing more quickly than expected and has suggested that a ‘soft-landing’ may be in sight. The IMF is now forecasting global growth of 3.1% in 2024, up two-tenths of a percentage point from its October forecast. It expects unchanged growth next year, at 3.2%.
The Federal Open Market Committee (FOMC) voted unanimously for no rate changes at both the February and March meetings, maintaining the Fed Funds target rate at a range of 5.25% to 5.5%. Policymakers have emphasized their intention not to rush rate cuts until they see further evidence of inflation stabilizing. According to the FOMC dot plot, which is a survey of policymakers’ rate projections, most FOMC members predict a total of 75 basis points of rate cuts this year. Given strong economic data, investors have re-adjusted rate expectations for 2024. After diverging from the Fed’s forecast for a while, The Fed funds future market is now predicting a similar rate path as the central bank.
In the equity markets, strong corporate earnings and expectations of easing central bank policies overshadowed sticky inflation and helped propel the major averages to all-time highs. The S&P 500 gained 10.55% in the first quarter, its strongest rally since 2019. Performance varied dramatically by sector, with communications (+15.82%) and real estate (-0.55%) being the extremes. The broader international markets also benefited. The Eurostoxx 50 gained 9.03% with Germany (+6.22%), France (+5.14%) and the UK (+2.20%) lagging (adjusted to USD for comparability). In Asia, Japan rallied (+11.33%) while China’s Hang Seng continued to show weakness (-0.45%).
At quarter end, the Fund was allocated approximately 70 to equities, 29% to fixed income securities (including some preferred stock and baby bonds) and 1% cash. We tactically reduced our equity position last summer, but added back equity exposure in time for the Q4 risk rally which continued into Q1.
The information contained in this article is for information purposes only, and represent the views of the author. It is not intended as specific investment or financial advice, or a recommendation or solicitation to buy or sell any security. Any investments or strategies listed in this article may not be suitable for all investors. Past performance is not indicative of future performance, and as with any investment, prices may fluctuate. It is recommended that advice is sought from a qualified investment professional prior to implementing any financial plan. LOM has made every effort to ensure that the contents herein have been compiled from sources believed reliable, however LOM does not warrant the accuracy, adequacy, timeliness, or completeness of this information expressly disclaims liability for errors or omissions in this information.
