The Monthly Review: March

Writing this monthly analysis feels particularly strange given the events of the past four weeks. March has largely mirrored February's market dynamics, with American stock indices reaching new historic highs. The S&P 500 has achieved a record-breaking positive streak, with nearly thirty percentage points of gain in just under five months.

Despite the Fed not cutting rates in March and some skepticism from Fed members about starting cuts in June, the American stock market remains supported by a strong economy and robust labor market. However, the Russell 2000, which represents small to medium-sized enterprises, has lagged behind the main indices.

There appears to be substantial liquidity in financial markets being passively invested in these indices, creating a self-reinforcing cycle. A new narrative is emerging among investors that the American economy will gain a significant competitive advantage through the use of artificial intelligence in manufacturing.

Interestingly, gold, silver, and oil are also appreciating, despite the conflicting factors usually associated with them, raising questions about asset valuation. Meanwhile, long-term interest rates continue to rise, which contradicts the notion that inflation is under control.

The Fed must be cautious about delaying any announcements regarding rate cuts, especially given the initial expectations for six reductions in 2024. Additionally, it remains to be seen whether the ECB will act independently and cut rates before the U.S.

In conclusion, the Chinese government continues to support its economy with measures to boost demand, and some signs of improvement are emerging. While some companies are trading at appealing multiples, a fundamental lack of confidence persists. Nonetheless, now may be a good time to start accumulating positions.