Weekly Market Summary

Extra Credit^*

• Despite uncertainty surrounding potential Fed rate cuts, economic strength and diminishing recession fears led to the best Q1 U.S. market performance since 2019. Mega-cap dominance was quite robust in the quarter and month, with the S&P 500 Top 50 up 2.27% and 12.11% for the quarter. The S&P 500 posted eight new closing highs in March to total 22 year-to-date (YTD-3/31/24). Should this continue for the 500, it would replace 1995’s record of 77 new closing highs. The Magnificent Seven turned into the Final Four, as the other 493 names were up 6.40% year-to-date. The S&P 500 continued its upward march in March with the index finishing the month up 3.22% and 10.56% for the quarter. The index broke through the 5,100 and 5,200 levels with intraday highs of 5,254.35 and 5,264.85. The last five-month run has added nearly $8.9 trillion into investor pockets. The Magnificent Seven (29% of the market value of the S&P 500) accounted for 37% of the YTD (3/31/24) return (of the 10.56%), but a new Final Four (18% of the S&P 500) has risen to the top for 2024, as Nvidia, Microsoft, Meta Platforms and Amazon.com, with their gains accounting for 47% of the YTD (3/31/24) return.
• The Bloomberg US Aggregate Bond Index returned -0.27% in January, as the 10-year Treasury rate increased 11 basis points from 3.88% to 3.99% and the 10-year/2-year Treasury spread finished at -0.28%. The 30-year Treasury rate was higher at 4.35%. Option-adjusted spreads were mostly wider for corporate debt with investment-grade corporate bonds 3 basis points tighter, high-yield bonds 21 basis points wider, and bank loans 1 basis points wider for March. Investment-grade corporate bonds: Single A corporate bonds were down -0.22% vs. -0.13% for BBB corporates, as credit quality was not the main driver for March’s performance. Duration was the main driver for returns, as short-duration investment-grade corporate bonds were up 0.45% vs. -0.93% for long investment-grade corporate bonds. High-yield bonds: The asset class saw BB high-yield underperform (BB bonds returned 0.06% vs. 1.81% for CC and below high-yield corporates). March also saw longer duration names outperform, as long-duration high yield outperformed the broad index for the month by 0.28%. Bank loans: Higher-quality loans underperformed, as single B loans returned 0.80% vs. 0.57% for BB loans. Large, more liquid loans underperformed, as loan facility sizes of $1 billion or more returned 0.65% vs. 1.10% for facility sizes of $201-$300 million. Distressed loans outperformed, as loans priced $60 and up to and including $80 returned 0.86% vs. 0.72% for loans over $90.
• Bank-loan and high-yield bond default rates, excluding distressed exchanges, finished March at 1.86% and 1.67%, respectively, up from 1.77% and 1.66% in February. The 25-year historical default rate for loans and high-yield bonds is 3.00% and 3.40%, respectively.

Any discussion of individual companies is not intended as recommendation to buy, hold or sell securities issued by those companies. Aristotle fund holdings can be found on the fund pages linked above.

The Magnificent Seven are Apple, Microsoft, Alphabet (Google), Amazon, Meta Platforms, NVIDIA and Tesla.

Sources: Bloomberg and JP Morgan as of 4/8/24.