First quarter recap: Markets, volatility, and the value of diversification.
Taking a closer look…
- Geopolitical tensions persist. Concerns around access to the Strait of Hormuz, and the potential for an increase in military activity, pushed oil prices back up and gold back down.1 Markets continue to evaluate the path for future interest-rate cuts amid inflationary pressure from higher oil prices.
- How did markets perform in the first quarter against this backdrop? US stocks fell 4.3% but returns within US stocks varied. Smaller companies and value stocks held up better, helped by higher energy prices and stronger performance in more defensive areas of the market. International stocks outperformed US stocks, and emerging markets outperformed developed markets, reflecting differences in valuation and sensitivity to geopolitical risks.2
- Key economic data continues to point to a resilient economy, despite volatility:
- Manufacturing activity, a key indicator for economic growth, rose in March. The ISM Manufacturing PMI, which measures manufacturing activity, grew to 52.7. A PMI above 50 is generally viewed as expansionary (or positive), while a PMI below 50 would be an indicator of economic contraction (or negative).3
- Hiring picked up in March, with the US adding 178,000 new jobs. This far exceeded expectations and was in stark contrast to the February release, which came in below expectations. The unemployment rate also ticked down to 4.3%.4 Both of these releases indicate stability in the US labor market, with an overall trend of employers continuing their practice of “slow hiring, low firing.”
Institutional Portfolio Manager, Strategic Advisers
"As geopolitical tensions persisted into the end of the first quarter, market performance highlighted an important shift beneath the surface. While US stocks finished modestly lower, returns were more balanced across smaller companies, value stocks, and international markets. This broader market leadership, following years dominated by a small group of large US stocks, reinforces the value of diversification across regions and company sizes, particularly in more uncertain environments."
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For over 30 years, Strategic Advisers and its dedicated group of seasoned investment professionals have helped clients reach their financial goals. Our team of portfolio managers, with specialized areas of focus in asset allocation and specific asset classes, along with our deep quantitative and fundamental research, drive our investment selection and risk management decisions on behalf of our clients.