Gains All Around: March 2024 HANDLS Monthly Report

Gains All Around

Investors seeking clarity on the future path of inflation and interest rates struggled to find it in March as key economic indictors sent mixed signals. The month kicked off with a strong February jobs report, with the Labor Department reporting that nonfarm payrolls increased by 275,000 for the month (against expectations of 198,000). While the February numbers suggested the economy continues to run hot, downward revisions to the December and January reports reduced the initial estimates for those months by 167,000 jobs and the unemployment rate rose from 3.7% to 3.9% in February.

While wage growth came in sluggish in February at 0.1%, the consumer price index (CPI) increased 0.4% for the month and 3.2% from a year prior, driven by higher energy prices as geopolitical uncertainty drove up the price of oil. While the monthly CPI print was in line with expectations, core CPI (which excludes food and energy prices) came in hotter than expected at 0.4% for the month and 3.8% for the year, leaving investors worried that the Federal Reserve Board would be forced to delay expected interest rate cuts.

Federal Reserve Chairman Jerome Powell assuaged these concerns somewhat following the March meeting of the Federal Reserve Board. While acknowledging that January and February inflation figures suggested that the fight against inflation had met headwinds, he noted that the Federal Reserve Board continued to forecast three rate cuts for calendar year 2024.

The release of the personal consumption expenditures price index (PCE) on Good Friday, the day after the last day of trading for the first quarter, largely validated the chairman’s comments as both PCE and Core PCE met expectations.

Despite or perhaps because of the mixed economic signals, financial markets generated positive returns across the board in March. While the technology stocks that had been leading the stock market in recent months faltered somewhat, the broader market rallied as the Core Large Cap Equity category generated a 2.0% return for the month. Meanwhile, modest declines in interest rates enabled the Core Fixed Income category to rebound from a challenging February with a 0.9% return in March (although the first two trading days of April erased these gains).

Every income-oriented category that makes up the Nasdaq Dorsey Wright Explore portion of HANDLS Indexes delivered positive returns in March. Leading the way were Utilities, which rallied 6.6% in March and pushed their year-to-date returns to 4.3% returns. MLPs continued their red-hot run, returning 3.9% in March and 13.9% for the year-to-date period. Also showing strength was the Dividend Equity category, which outperformed the Core Large Cap Equity category with a 2.8% gain for the month.

Fixed income returns were generally more modest, with the Preferred Securities category lagging the pack with a relatively paltry 0.4% return in March.

The Nasdaq 5HANDL Index returned 1.7% for the month. The Nasdaq 7 HANDL Index, the 1.3x leveraged version of the index, gained 2.1% in January while the Nasdaq 10 HANDL Index, the 2.0x leveraged version of the index, delivered a 2.9% return.

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