For equity and bond markets, April saw a return to focus on the Fed, along with the concept that good news for the economy is bad news for asset prices. Strong job reports and persistent inflation data reduced the likelihood of Fed rate cuts in 2024. Stocks and bonds reacted negatively, with stocks posting their first down month since October.¹ At the May 1 meeting, the Fed held rates steady as was expected, but suggested the chances of raising rates are low, prompting a strong start to the new month.

Stocks and bonds slip over April

The Total US Stock Market declined by a little over 4% in April.² Small cap stocks, which have recently been seen as more rate sensitive, lost ground at a faster pace, while a declining dollar helped support international stocks, which lost about 2.5%. Expectations of higher rates for longer suppressed bond prices and the US Aggregate Bond market is now down for the year. It is worth noting that bonds were also down late in 2023 but rallied to finish the year with higher returns than cash in general.

S&P still up YoY

S&P 500 earnings are estimated by FactSet to have grown by 5% year-over-year in the first quarter, squashing concerns that a recession may be forming.³ Analysts polled by FactSet continue to expect earnings can accelerate by more than 10% for the full year, which will be important to achieve for stock prices to maintain momentum. Results from the largest technology companies were mixed, and five of the group of Magnificent Seven stocks were down for the month.

Utilities stocks, which had been significantly trailing the market before April, rallied and are now ahead of the overall market for the year. Investors seem to be awakening to the idea that the massive amounts of power needed to run AI applications will spur significant demand increases.  

Read more: One thing: The Road ahead