TSCO - Ithaka Group Q1 2024 U.S. Growth Commentary

2024-04-25 10:45:00 ET

Summary

• The Ithaka Group is an independent investment boutique that specializes in managing high-quality, concentrated growth equity portfolios.
• The first quarter of 2024 saw a decoupling of the relationship between bond yields and equities, with the S&P 500 rising 10.6%, the Russell 1000 Growth rising 11.4%, and the Dow rising 5.6%.
• These equity gains materialized despite the 10-year treasury yield increasing from 3.86% on January 1st to 4.20% on March 31st.
• During the first quarter, Ithaka’s portfolio outperformed in a strong market, rising 14.9% (gross of fees) vs the R1G rising 11.4%.

Market Review

The first quarter of 2024 saw a decoupling of the relationship between bond yields and equities, with the S&P 500 rising 10.6%, the Russell 1000 Growth rising 11.4%, and the Dow rising 5.6%. These equity gains materialized despite the 10-year treasury yield increasing from 3.86% on January 1st to 4.20% on March 31st. The S&P's 10.6% return followed on the heels of the 11.7% return in 4Q23, marking just the third time in the past 12 years that the index has had two consecutive quarters of double-digit gains. Even more astonishing than the returns has been the lack of downside volatility, with only two weekly drops for the S&P so far year-to-date, no weekly drops of greater than 2% since October 23rd, and 22 new all-time highs for the index thus far in 2024. Looking at the broader investable-asset universe, the 1st quarter saw a rally in global equities, commodities, gold, the Japanese stock market, crypto markets, and meme stocks. This broad asset-price appreciation took shape in the face of heavily fluctuating Federal Funds rate expectations. To start the year, market participants had priced in six rate cuts (totaling 150bps of cumulative reduction) and a soft-landing (or no-landing) scenario for the US economy. Fast-forward three months, and we have now witnessed three consecutive months of accelerating headline CPI (3.1% in January, 3.2% in February, and 3.5% in March) and the market's latest forecast for only 1-2 rate cuts, representing cumulative cuts of 25-50bps....

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