IMCB - Capital Markets Outlook: Q2 2024

2024-05-05 01:45:00 ET

Summary

• Investors are wrestling with concerns over stubborn inflation, faster-than-expected economic growth, and a tight labor market. We expect normalization to continue, though the path won’t likely be a smooth one.
• As equity markets catch their breath, we expect fundamentals to come under greater scrutiny, which we think will open up opportunities in both different equity styles and low-volatility stocks—for more risk-aware investors.
• After a whirlwind first quarter, interest rates ultimately settled in higher across most of the yield curve, neutralizing tighter credit spreads in corporate bonds. On an all-in basis, we believe current yields and low bond prices could drive solid return potential.

Standing at the Intersection of Hope and Fear

In the first quarter of 2024, most major equity market indices rallied to all-time highs on the growing potential of an artificial intelligence ((AI)) revolution. In contrast, longer-term interest rates were pushed higher as investors scaled back expectations of interest-rate cuts this year. Bond markets ended up mixed, with credit holding up fairly well, but Treasury bonds softened by rising rates....

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