Monthly Market Update — September 2021

Key Points

  • MORE THAN JUST THE MAGNIFICENT 7 March witnessed a welcome broadening of returns and earnings. 2023 market leadership was totally dominated by a narrow group of mega cap technology stocks, the so-called Magnificent 7. Fortunately, both returns and earnings are seeing new leadership and wider participation, which may help sustain the market rally.
  • ECONOMIC SCHIZOPHRENIA STABILIZES Since COVID, a vast array of economic indicators have been fluctuating pretty wildly. But, it is encouraging that the net year-over-year change for the indicators turned positive, and the range of fluctuations has narrowed considerably as extreme readings have diminished.
  • MUCH IMPROVED, BUT STILL NOT GREAT As economic data continues to surprise to the upside and segments of the economy are seemingly coming out of recession (such as the manufacturing and industrial sectors), the risk of recession is dissipating, and a soft landing scenario is becoming more likely.
  • DOLLAR APPRECIATION MUST BE APPRECIATED For more than a decade, non-U.S. stock returns have consistently trailed U.S. stocks. U.S. investors might not be aware of how much those non-U.S. stock market returns are impacted by currencies, not just the stocks themselves.
  • APRIL HAS BEEN SEASONALLY STRONG Since 1928, the S&P 500 has seen seasonal tailwinds in April. Even after a solidly positive March (like we just experienced), subsequent returns for the month of April, the second quarter, and the rest of the calendar year were historically above average.
  • WILL TAX REBATES BE DIVERTED TO DEBT Analysts are wondering if April tax rebates, which tend to give the market a Spring boost as they are spent and invested, may instead be diverted to help pay down consumer debt, which has grown to record levels. If rebates are used to pay down debt, it may prove to be a hurdle for markets.    

Market Summary

Asset Class Total Returns

[Market Update] - Asset Class Total Returns_Q1 2024 | The Retirement Planning Group

Source: Bloomberg, as of March 31, 2024. Performance figures are index total returns: US Bonds (Barclays US Aggregate Bond TR), US High Yield (Barclays US HY 2% Issuer-Capped TR), International Bonds (Barclays Global Aggregate ex USD TR), Large Caps (S&P 500 TR), Small Caps (Russell 2000 TR), Developed Markets (MSCI EAFE NR USD), Emerging Markets (MSCI EM NR USD), Real Estate (FTSE NAREIT All Equity REITS TR).

“Enthusiasm is common. Endurance is rare.” – Angela Duckworth

Angela Duckworth, a Professor of Psychology and author of the 2016 book Grit: The Power of Passion and Perseverance, is well known for her research pertaining to the concepts of grit and resilience. The month and quarter, which just ended in March, seem to indicate that the U.S. economy and stock market are very familiar with her work, too. Nowadays, it is nearly impossible to find any coverage about the market or economy that doesn’t include “resilient” as a descriptor or reference. “The US Economy’s Resilience is Now Undeniable,” declared a Bloomberg headline near the end of March. Investor’s Business Daily encourages a click with the banner “Market Resilient with Fed on Tap.”  In a review of the first quarter, The Wall Street Journal tells readers, “A resilient economy, excitement about artificial-intelligence technology, and expectations for interest-rate cuts this year all bode well for the stock market.” Just before the publication of this missive, a Reuters recap of the March Employment Situation Report was titled “Strong jobs report shows economy is resilient.” This edition of the Monthly Market Update will be no different, showing how the data does indeed demonstrate a fair amount of grit and resilience. 

We begin with the headline S&P 500 Index, which just capped its best first-quarter performance (up +10.2%) since 2019 by closing at its 22nd record high of the year. For the month of March, it was up +3.2%, marking its fifth consecutive positive month. Five-month win streaks aren’t common but aren’t exactly rare either. However, a November to March five-month winning stretch is a bit of rare endurance. It hasn’t occurred since 2013, when the S&P 500 gained +11.1%, and then finished calendar year 2013 with a total return of +32.4% (including dividends). You have to go back to the late 1990s to find another November to March win streak. 

An encouraging aspect of the March advance was that it came with new leadership. For most of 2023 and the first two months of this year, the market was narrow and driven almost entirely by the Technology and Communication Services sectors. In March, the market broadened out, with the Energy and Utilities sectors taking the lead, up +9.1% and +7.1%, respectively. The next best sector was the Materials sector, with a +5.8% gain. The Communication Services sector was +3.8%, about middle-of-the-pack, while Technology was third-from-bottom with a flattish +0.2% return. Below, in the section titled More Than Just the Magnificent 7, we discuss how earnings have also broadened beyond the mega-cap tech stocks. With tech lagging in March, the Nasdaq Composite Index had a fairly pedestrian +1.8% gain, though it also capped a 5-week win streak. It wasn’t just the S&P 500 showing better breadth in performance during March. The small cap Russell 2000 Index was up +3.4% for the month, topping the other major U.S. and international stock indices. 

Although they trailed the gains of the S&P and Russell, non-U.S. stocks still saw healthy advances. Developed market international stocks (as measured by the MSCI EAFE Index) were up for a fifth consecutive month, gaining +2.8%, while the MSCI Emerging Markets Index was up +2.1%, positive in four of the last five months. Those gains came in spite of the U.S. dollar gaining for a third consecutive month. The Dollar Appreciation Must Be Appreciated section below goes into more detail about how a strong U.S. dollar is a headwind for non-U.S. assets and makes the March performance for non-U.S. stocks more impressive.

Bond yields and prices were little changed in March, but up meaningfully for the first quarter. Yields did fall to a five-week low early in March but rebounded sharply to near their highest levels of the year. The 10-year U.S. Treasury yield shed -5 basis points to close the month at 4.20%, while the 2-year U.S. Treasury yield was flat at 4.62%. Inflation reaccelerated for a second straight month, with both consumer (CPI) and wholesale (PPI) inflation surprising to the upside. U.S. crude oil prices were also higher, seeing their largest monthly gains since July 2023. Gold and other commodities were also higher, showing the breadth of the inflation pressures. Nevertheless, bonds still managed to make modest gains in March. The Bloomberg U.S. Aggregate Bond Index was up +0.9% for the month but down -0.8% for the quarter. Non-U.S. bonds (the Bloomberg Global Aggregate ex U.S. Bond Index) eked out a +0.2% return for March but are down -3.2% for Q1. 

Like February, the economic data in March continued to improve and show its grit. Just before the end of the month, the government reported that the U.S. economy grew even more than previously thought. The revised and final estimate of Q4-2023 Gross Domestic Product (GDP), the government’s main measure of economic activity in the U.S., was revised up to +3.4% from +3.2%. Consumer Sentiment rose to its highest level in almost three years, according to a University of Michigan survey. Survey data from both the services and manufacturing Purchasing Managers’ Indices (PMIs) are firmly in expansionary territory now. And the Bureau of Labor Statistics just reported another hotter-than-expected jobs report for March with 300,000 new nonfarm payrolls versus expectations for just 205,000. The solid economy could mean the Federal Reserve keeps interest rates higher for longer. According to the CME FedWatch Tool, the odds of at least one rate cut by the end of the Fed’s June meeting now stand at just 49%, the first time it’s been below 50% since last August. Data from research firm Strategas also shows earnings growth for the fourth quarter ended up being twice as good as expected. As long as the economy and earnings remain resilient (there’s that word again), markets may be able to get comfortable with interest rates where they are. 

[Market Update] - Market Snapshot_Q1 2024 | The Retirement Planning Group

Source: Bloomberg. Data as of March 31, 2024.
Price Returns for Equity, Total Returns for Bonds.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

Quick Takes


J.P. Morgan Asset Management points out that after a lackluster 2023, profits could experience healthy growth in 2024 of about +11%. The Magnificent 7 (Mag7) — the mega cap, tech-oriented firms Alphabet (Google), Amazon, Apple, Meta Platforms (Facebook), Microsoft, NVIDIA, and Tesla — drove the lion share of earnings growth last year, but broadening profit leadership should present opportunities in other parts of the market in 2024. As a reminder, the performance of the Mag7 stocks in 2023 accounted for 58% of the +26.23% gain in the S&P 500, and the seven stocks increased by an average of +76% for the year. First Trust cites the Mag7 earnings growth as a big reason for that stunning performance, led by NVIDIA’s Artificial Intelligence (AI) driven increase in profits. Apple, Google, and Microsoft all had solid earnings growth too. After terrible earnings in 2022, both Meta and Amazon saw huge rebounds in their earnings in 2023 (mostly as a result of significant cost cutting and easy comparisons to the terrible 2022 results). Meta increased earnings by nearly +70% in 2023 after seeing a -37% decline in earnings the prior year. Amazon earned over $30 billion in 2023 after actually losing money in 2022. Tesla was the lone outlier and saw earnings decline in 2023, and their stock price has caught up to that reality in 2024, dropping -30% in the first quarter. Analysis of the fourth quarter earnings by Strategas shows 8 of 11 S&P 500 sectors had positive earnings growth, and overall S&P 500 earnings growth came in at +8% versus expectations of just +4.7% at the start of the quarter. Communication Services, Utilities, and Consumer Discretionary all grew more than Technology in Q1. FactSet projects that Health Care and Financials will join Technology and Communication Services with double digit earnings growth for calendar year 2024.

Broadening Profit Leadership Should Help Sustain Market Progress

More companies are expected to see earnings growth and profit margins improvements

[Market Update] - Broadening Profit Leadership Should Help Sustain Market Progress_Q1 2024 | The Retirement Planning Group

Source: J.P. Morgan Asset Management.


Every week, as well as here in the monthly update, we track and chronicle dozens of economic indicators across various categories of the economy like the Consumer, Employment, Housing, Inflation, and Manufacturing/Output. Bespoke Investment Group publishes a Matrix of Economic Indicators that does a nice job summarizing how the year-over-year changes for all these indicators change every month. With all the February data now released and aggregated for all 36 indicators, with the bottom line summary showing a marked improvement from the plunge the prior month. At this time in March, looking at all the January data, the net improvement had dropped to -14 (meaning of the 36 indicators, 25 had seen weaker year-over-year trends while just 11 had stronger year-over-year trends). But at the very right of the chart, the February net result flipped to a positive +3 (19 were positive year-over-year, 16 were negative, and one was unchanged). Since COVID, these have been fluctuating pretty wildly, which has continued into this year. But it is encouraging to see the range of the fluctuations start to narrow considerably, meaning extreme readings have diminished, and the data has become more stable. It is also encouraging to see indicators in the manufacturing sector continue to improve after many were in recessionary territory for much of 2023. Also encouraging is that the consumer category rebounded from a dip into negative territory in January and was back to positive levels in February thanks to better readings on Retail Sales and Auto Sales. Consumption is 70% of the economy so the rebound there in the face of reaccelerating inflation and high interest rates shows the economy remains resilient.

The Economy Loves Me, the Economy Loves Me Not

Net Number of Economic Indicators Accelerating, Year-over-Year 2000-2024

[Market Update] - The Economy Loves Me, the Economy Loves Me Not_Q1 2024 | The Retirement Planning Group

Source: Bespoke Investment Group.


With the economic data continuing to surprise to the upside and segments of the economy seemingly coming out of recession (such as the manufacturing and industrial sectors) the risk of recession is dissipating.  The Recession Risk Dashboard by ClearBridge Investments is a nice, quick summary of the broad segments of the economy and shows how it has been improving over the last few quarters. Their Recession Risk Dashboard’s overall signal—think traffic light signals here—has improved to YELLOW (Caution) from RED (Recession). Like the Bespoke Economic Indicators Matrix, this is a clear improvement from the end of September and December, but importantly, it is not yet GREEN. In other words, they still don’t show any clear Expansionary signals. That means that the base case view of a recession in 2024 has shifted to the more probable likelihood of a soft landing scenario in which the economy slows but is able to avert a recession. Ultimately that should be positive for equities, but it may mean some turbulence to come as investors continue to readjust their expectations to fewer, and possibly no, rate cuts this year. 

It’s Looking Better, but No All-Clear Yet

Recession Risk Dashboard Has Improved, but the Work Isn’t Done

[Market Update] - Its Looking Better but No All Clear Yet_Q1 2024 | The Retirement Planning Group

Source: ClearBridge Investments.


For more than a decade, non-U.S. stock returns have consistently trailed U.S. stocks. And not by a trivial amount. For the 10-year period ending in March, the S&P 500 total return (with dividends included) was +235%, or about 13% annually. In contrast, international stocks, as measured by the MSCI World ex U.S. Index in U.S. dollar (USD) terms, have only produced a total return of 57% over that same 10-year period, or about 4.7% annually. U.S. investors might not be aware of how much those non-U.S. stock market returns are impacted by currencies, not just the stocks themselves. When U.S. investors buy foreign stocks, they become exposed to two sources of return. First, they receive the return of the underlying stocks in their local foreign currencies. Second, the total return of the investment reflects changes in the exchange rates between the USD and the local currencies held. Analysis by Avantis Investors shows that since 2014, the U.S. dollar has appreciated about +30% against a basket of major foreign currencies. The return of the MSCI World ex U.S. Index in local currency terms (i.e., in the respective currencies of all the countries included in the index) was almost twice as high at +105%, or 7.5%. But the reverse can also be true and has been, as shown in the chart below. In the 10 years from 2003 to 2013, a persistently weaker U.S. dollar helped non-U.S. stocks outperform their U.S. counterparts consistently. Currencies are volatile, and the magnitude can shift quite a bit from period to period, so we shouldn’t expect that what has happened over the past few years, or the past decade, will continue forever, nor should we be surprised if it reverses for an extended period of time.

Currency Can Impact Non-U.S. Stock Returns

Currency Impact Hurts Returns Over Some Periods but Helps Over Others

[Market Update] - Currency Can Impact Non-US Stock Returns_Q1 2024 | The Retirement Planning Group

Source: MSCI, Bloomberg, Avantis.


The S&P 500 is off to its best start to a year in 5 years, ending the first quarter at record highs. Yet, in the first few days of April, investors have shown some jitters as doubts creep in about how many, if any, rate cuts the Federal Reserve will deliver this year. Nevertheless, going back decades, history bodes well for stocks in April. According to data from Bank of America Global Research, since 1928, the S&P 500 has seen seasonal tailwinds in April with an average gain of +1.3% – tied with June for the second best monthly return, trailing only July’s +1.7% average. The “hit rate” for April is also promising, with the month being positive in 66% of the years since 1928, only trailing December’s 74% probability for positive returns. Bespoke Investment Group was curious about what the market’s performance looks like when taking account of the strong performance seen in March, which was pretty strong. In the chart below, they show average performance broken into three buckets: declines, modest performance, and big gains. As shown, when March is up 0% to +5% (as is the case currently), average returns for April, the second quarter, and the rest of the calendar year stand out compared to the other buckets (the light blue middle bars). Of course, there are no guarantees that the seasonal trends will work this year, but the odds certainly favor the modest March return scenario that just occurred and that the subsequent “Rest of the Year” average return has been more than +8%.

Will April Deliver Above Average Returns Again

S&P 500 Subsequent Performance (%): Since 1928

[Market Update] - Will April Deliver Above Average Returns Again_Q1 2024 | The Retirement Planning Group

Source: Bespoke Investment Group.


There is no specific attribution to the distinct historical seasonal tailwind seen in April, but many cite various factors, including April being the last month of the so-called “sell in May and go away” six-month period phenomenon (the dominant six-month period of market returns before the summer doldrums start), year-end bonuses making their way into brokerage accounts, and tax rebates being invested by taxpayers. But some analysts are wondering if those tax rebates may be diverted to help pay down debt, which has grown to record levels. Households were holding a record $17.5 trillion in debt last year, including record amounts tied to their credit cards and vehicle loans, according to the Federal Reserve. Those with rising debt balances say they are going to use their tax-refund checks to pay down their loans, reports The Wall Street Journal. About 40% of Americans rely on refunds to make ends meet, up +4 percentage points from last year, LendingTree found. Almost 106 million individual income-tax returns—about 65% of them—led to refunds in 2023, according to the Internal Revenue Service. This year, the average refund is $3,109 as of mid-March. As refund checks roll in, monthly household income rises as much as 30% above average in March, and spending jumps 119% the day after a refund check arrives, according to a JPMorgan Chase Institute study. But as the share of credit delinquencies increases, a Bankrate survey found that one in five Americans plans to use most of their tax refunds to pay down debt this year. That may prove to be a headwind for retailers and, ultimately, the markets, who typically see an uptick in spending in the days following the delivery of refund checks. 

This Year’s Tax Refunds May Go Towards Debt Hole

Share of credit card holders who are behind on monthly payments

[Market Update] - This Years Tax Refunds Go Towards Debt Hole_Q1 2024 | The Retirement Planning Group

Source: Moody’s Analytics, Equifax, The Wall Street Journal.

Asset Class Performance

The Importance of Diversification. Diversification mitigates the risk of relying on any single investment. It offers many long-term benefits, such as lowering portfolio volatility, improving risk-adjusted returns, and helping investments to compound more effectively.

[Market Update] - Asset Class Performance_Q1 2024 | The Retirement Planning Group

Source: Bloomberg.
Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by The Retirement Planning Group. The performance of those funds may be substantially different from the performance of the broad asset classes and to proxy ETFs represented here. US Bonds (iShares Core US Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (SPDR® Bloomberg Barclays International Corporate Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares US Real Estate ETF). The return displayed as “60/40 Allocation” is a weighted average of the ETF proxies shown as represented by: 30% US Bonds, 5% International Bonds, 5% High Yield Bonds, 10% Large Growth, 10% Large Value, 4% Mid Growth, 4% Mid Value, 2% Small Growth, 2% Small Value, 18% International Stock, 7% Emerging Markets, 3% Real Estate.

* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

Chris Bouffard is CIO of The Retirement Planning Group (TRPG), a Registered Investment Adviser. He has oversight of investments for the advisory services offered through TRPG.

Disclaimer: Information provided is for educational purposes only and does not constitute investment, legal or tax advice. All examples are hypothetical and for illustrative purposes only. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed. Please contact TRPG for more complete information based on your personal circumstances and to obtain personal individual investment advice.