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U.S. Equities Market Attributes May 2024

iBoxx USD Emerging Markets Monthly Commentary: April 2024

iBoxx Asian Local Currency Indices Monthly Commentary: April 2024

iBoxx USD Asia Ex-Japan Monthly Commentary: April 2024

U.S. Equities Market Attributes April 2024

U.S. Equities Market Attributes May 2024

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Howard Silverblatt

Senior Index Analyst, Product Management

S&P Dow Jones Indices

Key Highlights

Index Returns - U.S. Equities May 2024: Exhibit 1

Market Snapshot

The S&P 500 recouped its April (-4.16%) decline and posted its 23rd new closing high of the year (5,308.15 on May 15, compared to the prior 5,254.35 high on March 28).  The S&P 500’s rise was steady, as it posted five weekly gains in a row (up 6.79%), breaking above the 5,300 level (reaching 5,325.49 on May 16), as it went on to post another closing high (its 24th YTD, 5,321.41 on May 21).  For the last week of the month, however, it pulled back slightly (-0.51%) on what appeared to be profit-taking (with buying coming in on the afternoon of the last day of trading, turning a 0.84% loss into a 0.80% gain for the day), as it closed May at 5,277.51, up 4.80% (it had been up 5.67% during the month), more than making up for April’s 4.16% decline, and up 10.64% YTD (0.83% away from its closing high).  The Dow® also posted two new closing highs, first at 39,908.00 on May 15 and then at 40,003.59 on May 17 (its only close above 40,000; it reached 40,051.05 intraday), as it closed the month at 38,686.32, up 2.30% for the month and up 2.64% YTD.

For May, 10 of the 11 sectors increased, after 1 gaining last month and all 11 being up in March and February.  Information Technology did the best, up 9.95% for the month (up 16.93% YTD and up 30.00% from the 2021 close), while Energy did the worst and was the only negative sector, down 0.97% (up 10.62% YTD and up 67.49% from the close of 2021).

The S&P 500 closed at 5,277.51 (reaching a closing high of 5,321.41), up 4.80% (4.96% with dividends) from April’s 5,035.69 close, when it was down 4.16% (-4.08%) from March’s close of 5,254.35 (3.10%, 3.22%), as the 2024 YTD return was up 10.64% (11.18%).  For the three-month period, the index was up 3.56% (3.90%), as the one-year period was up 26.26% (28.17%), the 2023 return was up 24.23% (26.29%) and the 2022 return was -19.44%
(-18.11%).

For May, the S&P 500 posted 2 new closing highs, compared to none for April, 8 in March, 8 in February and 6 in January; it has set 24 new closing highs YTD, compared with none in 2023, 1 in 2022 and 70 in 2021 (the record highest, 1995, had 77).  The index was up 55.86% (66.90% with dividends) from its pre-COVID-19 Feb. 19, 2020, closing high.

Target prices continued up, as the S&P 500’s one-year Street consensus target price increased for a sixth month, after declining for two consecutive months, which followed 11 consecutive months of gains (which was after nine consecutive months of declines), to 5,890, an 11.6% gain (14.5% last month) from the current price and up from last month’s 5,766 (5,655 the month before that).  The Dow target price also increased for the sixth month, after two consecutive months of declines, which was after three consecutive months of gains, to USD 42,955, a 12.0% gain (13.2%) from now (42,808, 42,619).

The Biden administration announced new tariffs on USD 18 billion of goods from China, including quadruple tariffs on Chinese electric vehicles (to 100% from the current 25%) to protect U.S. manufacturers.  The increase is seen as having little impact, since few electric vehicles are imported to the U.S. from China.  Tariffs were also increased on medical supplies and solar supplies, as Biden extended the Section 301 Tariffs on Imports from China, which started in 2018 and covers USD 300 billion of Chinese products.

The U.S. FOMC met and as expected, left its rates unchanged.  The Fed said inflation has remained higher than hoped and that this may prolong higher interest rates.  The Fed also said it approved a plan to slow its USD 7.4 trillion balance sheet reduction by reinvesting maturing securities into new ones (it had been reducing its balance sheet USD 60 billion per month).

The FOMC minutes for the April 30-May 1, 2024, meeting (when it kept its interest rates unchanged at 5.25%) showed it was disappointed in the continued strength of inflation, and that it would take longer to be certain of when it would reach the 2% target.  It discussed measures to curb inflation, which would not include reducing interest rates.  The Fed’s Beige Book said the economy continued to slowly expand, but persistent inflation also continued, and it speculated that the economy was unlikely to further expand until inflation slowed.  The Federal Bank Reserve of Cleveland nominated former Goldman Sachs (GS) executive Beth Hammack (a current voting FOMC member) to be its new president, replacing Loretta Mester, who is retiring.

The Bank of England met and, as expected, voted (7-2) to keep its interest rates unchanged at 5.25%, while it indicated a June interest rate cut, with the Street expecting a 0.25% cut in June and another 0.25% reduction in 2024.  The minutes of the Royal Bank of Australia’s policy meeting (May 6-7, 2024, when it left interest rates unchanged at 4.35%) showed inflation returning under its forecast, as it discussed an interest rate increase.  Preliminary Q1 2024 U.K. GDP turned positive, up 0.6% for the quarter (0.4% expected), up from the -0.3% Q4 2023 reading, as the year-over-year rate was 0.2%, up from the prior -0.2%.

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iBoxx USD Emerging Markets Monthly Commentary: April 2024

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Catalina Zota

Associate Director, Fixed Income Product Management

S&P Dow Jones Indices

April 2024 Commentary

Market Overview

According to the U.S. Bureau of Labor Statistics, CPI increased 0.4% in March, the same increase as in February.  Over the past 12 months, inflation in the U.S. reached 3.5%, a 0.3% increase when compared to last month, driven by shelter and gasoline.  The FOMC statement released on May 1, 2024, emphasized the decision to maintain the target range for the federal funds rate at 5.25%-5.5%, quoting persistent inflation above the 2% target.  The Fed also decided that starting June 1, 2024, the cap on Treasury securities monthly redemptions will be lowered from the current USD 60 billion to USD 25 billion.  The implications of this move put a slight downward pressure on bond yields while also providing market liquidity.

The overnight repo rate, a measure of market liquidity, ranged between 5.31%-5.35%. On the equities side, the S&P 500® was down 4.16% in April, with all sectors in the red with the exception of Utilities, which was up 1.65%.  The biggest drop in the index was the Real Estate sector, down 8.50%.

Moving on to Latin America, Mexico’s inflation rate accelerated in the first two weeks of April to 4.63% from 4.48% the previous month. According to the World Economic Outlook published by the IMF, Mexico’s expected GDP was revised down to 2.4% for 2024 due to weaker-than-expected economic factors, particularly the contraction seen in the manufacturing industry in early 2024.  Brazil, Latin America’s largest economy, had its expected GDP growth reduced to 2.2% in 2024 due to tight monetary policy, fiscal consolidation and weakness in the agriculture sector.  Argentina’s GDP projection was also negative, at -2.6% in 2024, with an expected inflation rate for the year of 249.8%.  A more positive outlook is expected in 2025, after Milei’s reforms are fully implemented.  Overall, growth in the Latin American and Caribbean regions is expected to slow down in 2024.

In the eurozone, annual inflation is expected to remain at 2.4% according to a EuroStat press release on April 30, 2024.  According to market analysts, this added to the argument of keeping the ECB interest rates unchanged for the next upcoming meeting.  Moving to Asia, similar to last month, the HSBC India Manufacturing PMI was at a record high in April 2024, partially influenced by an overall global move away from China.  Although falling from 59.1 to 58.8 in April, this represented the second-best improvement in three and a half years.  The manufacturing PMI readings were fueled by strong demand in raw materials, better operating conditions and higher demand for goods.

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iBoxx Asian Local Currency Indices Monthly Commentary: April 2024

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Kangwei Yang

Director, Fixed Income Indices

S&P Dow Jones Indices

Monthly performance, maturity, yield and duration of the iBoxx ALBI, iBoxx ABF and iBoxx SGD Indices.

The wait for the next change in U.S. Fed funds rate continues.  As widely predicted by market analysts, the latest FOMC meeting that ended on May 1 concluded with no change in the key rate, which remained at its 5.25%-5.50% range, citing sticky inflation data and resilient economic growth.  As April 2024 ended, U.S. Treasuries—as represented by the iBoxx $ Treasuries—lost 2.39%, giving up the small gains seen in March.

In Asia, Bank Indonesia surprised the markets by raising its key seven-day reverse repo rate by 25 bps to 6.25% to provide support for the Indonesian rupiah.

This month, we also had a look into the YTD performance of USD corporate markets.  Broadly speaking, Asian USD bonds performed better than broad USD indices across both investment grade and high yield segments.  The outperformance was more pronounced in high yield bonds, with the Asian USD high yield segment—as represented by iBoxx USD Asia ex-Japan High Yield—up 5.24% YTD, compared to 0.47% in broad USD high yield markets—as represented by iBoxx USD High Yield Developed Markets.  One of the key contributors was China-issued USD high yield bonds, which have returned 7.29% so far this year, a stark contrast to a loss of 14.58% in 2023.

iBoxx Asian Local Bond Index (ALBI)

iBoxx Asian Local Currency Indices: Monthly Commentary: Exhibit 1

Most Asian markets represented in the iBoxx Asian Local Bond Index (ALBI) retreated in April.  Additionally, most local currencies (except the Hong Kong dollar and offshore RMB) depreciated against the greenback.  As a result, the overall index—in USD unhedged terms—lost 2.08%.

In local currency terms, China Onshore was the only market that recorded gains last month, up 0.42%.  All other markets pulled back, with the Philippines (down 2.05%) and Thailand (down 1.93%) being the worst-performing markets in the index (excluding Taiwan as it has 0% weight in the index).

Across the yield curve, most markets observed gains at the short end, with India 1-3 the highest with a modest 0.37% uptick.  In the 10+ segment, most markets (except China Onshore and China Offshore) posted losses, with the Philippines 10+ (down 5.20%) and Singapore 10+ (down 4.25%) faring the worst.  China Onshore was the only market with gains across maturities.

As of the end of April, the overall index yield decreased marginally by 17 bps to 4.06%.  India remained the highest-yielding bond market in the index, posting 7.26%, while China Onshore (2.38%) represented the lowest-yielding market.

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iBoxx USD Asia Ex-Japan Monthly Commentary: April 2024

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Jessica Tan

Principal, Fixed Income Indices

S&P Dow Jones Indices

April 2024 Commentary

Following persistent inflation numbers in March, the U.S. Federal Reserve (Fed) expressed that it would take longer to tame inflation to its 2% target and signaled that higher-for-longer interest rates would be in the cards for the U.S. economy.  Interest rates remained unchanged for the Fed, European Central Bank (ECB) and most Asian economies.  During the same period, the U.S. dollar continued to strengthen and appreciated against most Asian currencies.  Unlike its neighbors in the region, Bank Indonesia opted for a rate hike of 25 bps to 6.25% to support its own currency against the dollar, geopolitical risks and inflation.

On the equities front, the S&P 500® fell 4.16% in April after a double-digit return of 10.16% in the first quarter.  10-year U.S. Treasuries, as represented by the iBoxx USD Treasuries Current 10 Year, lost 3.47%, and their yield increased by 50 bps to 4.74%, reverting to levels last seen in November 2023.

China’s benchmark lending rate was left unchanged in April after a stronger-than-expected GDP growth of 5.3% was reported for Q1.  With an economic growth target of 5% in 2024, China policymakers have pledged to provide more support for the economy with additional monetary and fiscal policies.  To fund the increasing fiscal expenditures, China is expected to issue CNY 1 trillion of ultra-long-term special treasury bonds and speed up the issuance of local government special bonds.  Chinese-issued U.S. dollar bonds—as represented by the iBoxx USD Asia ex-Japan China—returned -0.39%, while Chinese stocks—as represented by the S&P China 500 (USD)—climbed by 4.05%, moving in the opposite direction of their respective Q1 returns of 1.64% and -0.83%.

iBoxx USD Asia Ex-Japan Monthly Commentary: Exhibit 1

Following gains across the board in March, all key sectors of the Asian U.S. dollar bond market reversed their gains in April and the overall market ended the month with a 1.07% loss, largely contributed by a 1.23% loss in the investment grade segment.  The high yield segment held up relatively better, only retreating 0.05%.  China Real Estate sustained its momentum from last month and gained another 1.31% in April.  Both the high yield and China LGFV segments performed well over the past year, with returns exceeding 5%.

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U.S. Equities Market Attributes April 2024

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Howard Silverblatt

Senior Index Analyst, Product Management

S&P Dow Jones Indices

Key Highlights

Index Returns - U.S. Equities April 2024: Exhibit 1

Market Snapshot

April’s -4.16% return for the S&P 500 stirred but did not shake the index’s 5,000 level; thanks to its Q1 2024 10.16% gain, the index still ended April with a positive YTD level of 5.57%.  The current level appears to be in the area of a defendable support level.  A significant amount of money is being directly put into the U.S. economy by our friends in Washington (a minimum of USD 34 billion via the recent Israel/Taiwan/Ukraine legislation for U.S. replenishment and USD 39 billion via the CHIP and Science Act in grants and loans for U.S. production), employment (with paychecks) remains high, and current actual earnings (and cash flow) are good (but the guidance not as much—even as Q2, Q3 and Q4 2024 have record estimates), as the U.S. was seen as having the best growth (and stability) potential globally.

While guidance headlines were protested, actual earnings are coming in above the 1% estimated gain (76.8% beat rate) and above the whispered 2.5% rate (2.7% at this point, and up 5.4% year-over-year), with sales 4.1% below the record Q4 2023 level (which is typical—something about the holiday sales), but up 4.1% year-over-year.  Economic data came in on all sides (recession, the new concerns for stagnation, growth), adding volatility, but in the end, it was earnings and fundamentals (along with some implied projections from the data) that ruled the trades.

Year-to-date, the S&P 500 remained up 5.57% (with 10 of the 11 sectors up; Real Estate was down 9.86%), as breadth declined but remained positive (302 up and 199 down, compared to last March’s 369 and 134 YTD, respectively).  The Magnificent 7 as a group still dominated, accounting for 51% of the index return (which included Apple’s 11.5% YTD decline and Tesla’s 26.2% YTD decline), as NVIDIA (up 74.5% YTD) represented 41% of the S&P 500’s YTD gain.  And while not magnificent (unless you were a short seller), Boeing (BA; with many seeing it as a long-term buy) was the third-worst issue in the index, down 35.6% YTD.

Treasury Secretary Yellen made her second trip to China, as she attempted to get the country to reduce its exports and focus on growth through domestic demand.  At the core of her discussions were what the U.S. considered artificially cheap Chinese export products, which threaten U.S. (and foreign) firms.  Biden called to triple the 7.5% tariffs (under Section 301 of the U.S. Trade Act) on imported Chinese steel and aluminum (which Trump started in 2017).  The U.S. continued to encourage domestic chip manufacturing (via the CHIPS and Science Act), as it awarded Samsung Electronics USD 6 billion, Micron Technology (MU) USD 6.1 billion and Taiwan Semiconductor Manufacturing (TSM) USD 6.6 billion; previously it had awarded Intel (INTC) USD 8.5 billion; USD 10 billion remains in the program to be awarded.

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