January 2024 Returns and Asset Performance
February 3, 2024
Download – Bond Market Masterclass
March 28, 2024
Major Asset Classes
February 2024
Performance Comparison
Introduction
February 2024 returns marked the fourth straight month of positive stock market gains. Once again, concentrated equity portfolios with the largest companies outperformed index benchmarks. However, the market’s true strength lies with those sectors that are now outperforming Technology shares, notably small and large cap shares in the Consumer Discretionary, Material, and Industrial sectors. The rotation away from Technology leadership is significant. In response, we decompose US equity returns to better illustrate the shift taking place. The brief also provides a simple visual summary of performance across and within the major asset classes.
Core US Indices
In February, the benchmark S&P 500 index (+5.2%) lagged the NASDAQ 100 Index (+5.3%) and the S&P 500 Top 50 index (+6.3%). The largest companies continue to dominate market returns. Moreover, we see that the Mid Cap S&P 400 Index (+5.9%) also beat the market benchmark, confirming improved market breadth. However, the Small Cap S&P 600 Index (+3.2%) is still trailing the market benchmark, as did the the S&P 500 Equal Weight Index (4.0%). Year-to-date (YTD), the S&P 500 (+6.8%) also lags NASDAQ (+7.2%) and the Top 50 shares (+9.4%), while the Small Cap S&P 600 Index (-0.8%) is remains negative for the year.
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US Sector Indices
The top sectors of the market that beat S&P 500 Index include large cap Consumer Discretionary (+7.9%), Industrials (+7.2%) and Materials (+6.5%). Small cap Consumer Discretionary (+7.6%) and Industrials (7.0%) also beat the market benchmark. Notably, Technology (+4.7%) and Communication Services (+4.6%) lagged the benchmark. This shift in leadership is important and worth watching going forward. The top sectors YTD are large cap Communications (+9.2%), Technology (+7.5%) and Financials (+7.3%). These sectors had a key role in our adaptive index portfolio.
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US Factor Indices
Factor portfolios hold shares that focus on the core drivers behind returns, such as company size, value, profitability, growth, and momentum. Multi-factor portfolios focus on two or more factors when selecting shares. During February, returns were lead by the Momentum Factor (+10.0%), Mid Cap Growth (+9.6%), Large Cap Growth (7.2%), and US Quality shares (+6.5%). The same factor rankings are also leading on a YTD basis.
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US Megatrend Equities
US megatrend equities are thematic growth portfolios that seek to capture the primary secular trends of the market. For example, February returns were lead by Blockchain shares (+27.2%), Semiconductors (+11.3%) and Electric Vehicles (8.4%). The Robotics/AI portfolio (+4.6%) and the Renewable Energy portfolio (0.7%) both trailed the S%P 500 index. We also see that performance is much more variable on a YTD basis. Semiconductors (+13.2%) sit at the top of the list and Renewable Energy (-10.7%) is at the bottom.
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Developed Market Equities
International developed markets (+2.6%) again under performed US shares in February. The top developed markets included Israel (+8.9%), Italy (+6.4%), and Ireland (+6.2%). Meanwhile, results across the large economies varied, seen by Japan (+4.4%) and the UK (+1.0%). Year-to-date, Israel (+9.5%) is again in the lead, followed by Ireland (+8.1%), and Japan (+7.8%), outperforming the US S&P 500 index.
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Emerging Market Equities
February returns for the S&P Emerging Markets Index (+3.9%) were lead by South Korea (+7.8%), Saudi Arabia (+6.8%) and China (+6.7%). India (+2.5%) trailed the group benchmark, as did Brazil (+0.3%) and Mexico (-2.1%). Turkey (+16.1%) leads the group since the start of the year while the group benchmark is flat Since the end of the year.
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Government Bonds
The red ink is most pronounced in the fixed income markets where the US Aggregate Bond Index (-1.47%) depicts the benchmark return across the yield curve. February returns were led by Emerging market Government Bonds (+0.78%) and US T-Bills (+0.45%). Importantly, the international Aggregate Bonds Index (-0.38%) beat the US benchmark. Finally, long duration bonds had the greatest losses in February, exceeding 2%. Since the start of the year, The US Aggregate Bond Index (-1.62%) is down and losses for 20 year Treasuries (-4.45%) are down significantly.
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Corporate & Infrastructure Bonds
The iBoxx Corporate Bond Index (+0.3%) masked a wide range of results across the asset group. US Infrastructure Projects (+5.40%) lead the pack with decent gains, followed by Emerging market Corporate Bonds (+2.37%) and US Multi-sector REITS (+1.96%). Losses in February were most pronounced in 10-year corporate paper (-2.89%) and Investment Grade Bonds (-1.93%). Year to date, the iBOXX Corporate Bond Index (+0.42%) is flat to slightly up. Hedged High Yield Bonds (+2.28%) top the list, while US Residential REITS (-5.32%) trail the pack.
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Commodities
Commodities, as measured by S&P GS Commodity Index (+0.9%) were flat with results again proving to be highly variable. Gains in February were strongest in Cocoa (+35.0%), Cotton (+19.2%) and Lean Hogs (+13.5%). Natural Gas (-11.4%) continues to be among the weakest commodities. Since December, the broad commodity index (+5.3%) has been inflating, lead by the same commodities that led February returns. Price declines are most evident in grains, metals, and natural gas since the first of the year.
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Currencies
The strength in Commodities since December is notable since that the US Dollar (+3.0%) also increased in the first two months. Year-to-date, the weakest currencies have been the Japanese Yen (-5.9%) and the Swiss Franc (-5.5%).
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Cryptocurrencies
Cryptocurrencies had spectacular returns in February, explaining in part the strong gains seen in blockchain shares. Bitcoin (+43.7%) returns, while impressive, were topped in February by gains for Dogecoin (+48.8%) and Etheruem (+46.4%). Since January, Bitcoin (+45.4%) tops the pack of crypto assets.
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