GBBEF - Weekly Commentary: On Currency Watch Following Melt-Up Q1 2024
2024-03-30 05:58:04 ET
Summary
- Financial conditions loosened further, building on the Fed's Q4 dovish pivot.
- For the quarter, the S&P 500 returned (price and dividends) 10.55%.
- While 10-year Treasury yields jumped 32 bps during Q1 to 4.20%, corporate Credit notably outperformed.
Another remarkable quarter. Financial conditions loosened further, building on the Fed's Q4 dovish pivot. The spectacular risk asset melt-up was ongoing. From October 26th lows to March highs, the Semiconductors rallied 65%, the KBW Bank Index 47%, the NYSE Arca Computer Technology Index 39%, the small cap Russell 2000 31%, the Nasdaq100 30%, and the S&P 500 28%. Bitcoin ended the quarter up 159% from October lows, trading at a record high on March 14th ($73,798).
For the quarter, the S&P 500 returned (price and dividends) 10.55% - the "best first quarter since 2019." Super Micro Computer led the gainers, surging 255%. Nvidia jumped 82%, Micron Technology 38%, and Meta Platforms 37%. The Semiconductor Index (SOX) returned 17.76%, the Nasdaq Composite 9.32%, and the Nasdaq100 8.72%. The NYSE Arca Oil Index returned 16.44%, the Nasdaq Insurance Index 15.39%, the NYSE Arca Computer Technology Index 15.01%, the Nasdaq Transports 11.61%, and the NYSE TMT Index 10.55%.
While 10-year Treasury yields jumped 32 bps during Q1 to 4.20%, corporate Credit notably outperformed. Investment-grade spreads to Treasuries traded down to 88 bps late in the quarter, the narrowest risk premium since November 2021 - and within seven bps of the low back to 2005. High yield spreads dropped to 2.92 percentage points, the narrowest since January 2022. Corporate debt issuance was nothing short of phenomenal.
March 28 - Bloomberg (Caleb Mutua): "The primary US investment-grade corporate bond market logged its busiest first quarter on record, super-charged by investors clamoring for high yields before the Federal Reserve starts cutting interest rates. Blue-chip firms have capitalized on robust investor demand to borrow a record $529.5 billion this year through Wednesday, far outpacing the previous high of $479 billion in the first three months of 2020… Sales hit a record in January and February and March issuance of $142.2 billion has exceeded expectations."
Loose conditions fueled an M&A renaissance.
March 28 - Reuters (Anirban Sen and Anousha Sakoui): "Mergers and acquisitions (M&A) bounced back in the first quarter after a downbeat 2023… Total M&A volumes globally climbed 30% to about $755.1 billion, according to… Dealogic. The number of transactions worth more than $10 billion jumped to 14, compared with five during the same period last year… U.S. M&A volumes surged 59% to $431.8 billion. European deals jumped 64%, while Asia Pacific volumes slumped 40%."
March 28 - Financial Times (Ivan Levingston): "Blockbuster deals more than doubled in the first quarter of this year, signalling a nascent recovery in the mergers and acquisitions market following a lengthy drought. The number of takeovers worth at least $10bn jumped in the first three months of 2024 compared with the same period last year, driven by large US deals in the energy, tech and financial sectors… Eleven such transactions, with a total value of $215bn, were struck during the quarter, up from five takeovers worth a combined $100bn in the first three months of 2023."...
Weekly Commentary: On Currency Watch Following Melt-Up Q1 2024