Monthly Commentary - April, 2024
The Markets
All equity style box categories posted negative returns last month. Large Cap stocks, including the Core, Value, and Growth segments, showed moderate losses. Notably, Large Growth performed slightly better, shedding 3.79% compared to the 4.03% and 4.29% losses in the Core and Value sectors, respectively. Mid and Small Cap stocks experienced even more pronounced declines. Mid Value was particularly hard-hit with a 6.11% decrease, dragging its YTD performance into negative territory at -2.30%.
Sector performance within domestic markets also showed significant variations. The Energy sector was an outlier, decreasing by only 0.94% last month but maintaining a strong YTD gain of 12.45%, buoyed by fluctuating oil prices and geopolitical concerns. Utilities gained 1.66% last month, highlighting its status as a defensive investment amid broader market volatility, with a solid YTD increase of 6.25%. In contrast, REITs and Telecommunications faced steep declines, dropping 8.12% and 6.32% respectively, and recording negative YTD returns of -9.29% and -8.93% respectively.
The bond market mirrored the cautious stance seen in equities, with all major bond categories posting losses. US Core Aggregate Bonds fell by 2.48% last month. However, High Yield Bonds showed a slight resilience, dipping only 0.21% this month and maintaining a positive YTD gain of 1.97%, suggesting that the search for higher returns amid low rates continues to draw investor interest.
International stocks also struggled, though not as dramatically as some domestic sectors. The MSCI Europe and Pacific indices fell by 2.45% and 4.68% respectively, while Latin American markets dipped by 3.73%.
Alternative assets provided a brighter spot. Gold rose by 3.16% last month, with a significant YTD increase of 10.76%, underscoring its role as a safe haven during times of economic uncertainty. Broad Commodities also saw an increase of 0.95% and an impressive YTD gain of 11.02%, benefiting from inflationary pressures and supply chain disruptions.
The current market conditions suggest caution, characterized by a shift towards assets traditionally viewed as safer during periods of economic uncertainty and inflation. This pattern often precedes economic slowdowns or market corrections, providing a clear signal for investors to possibly rebalance their portfolios to hedge against projected risks.
iQUANT Models
iQUANT models were mostly down last month. Notably, the iQ Total Real Estate Model and the iQ All Cap Share Buyback Model suffered significant losses, posting returns of -8.99 and -8.08 respectively. The iQ SMid Cap 10 Model saw the most substantial drop at -12.83, indicating a tough month for small to medium cap equities, which often reflect broader economic sentiments and can be more volatile in uncertain times.
The defensive strategies did not fare much better, with the iQ Defensive Super Sector Model and iQ S&P 500 Defensive Sector Model declining by -5.67 and -7.02, respectively. These figures suggest that even sectors traditionally viewed as 'safer' during volatile periods struggled to hold their ground. This downturn across defensive models could reflect a broader market adjustment or a specific reaction to external economic pressures affecting all sectors, including those usually considered more resilient.
On a brighter note, not all models reported negative returns. The iQ All Cap High Yield Model and iQ All Cap Smart Beta Model saw gains of 2.05 and 1.36, respectively. In addition, the iQ BRI Stability Mutual Fund Model lived up to its name by remaining stable over the past month, successfully side-stepping market fluctuations without any loss in value. It also recorded a moderate year-to-date gain of 3.62%.