MARKET COMMENTARY
Investors entered Q1 2024 optimistic that the economy was headed for a soft landing, inflation would continue to improve, and
the Fed would start cutting interest rates in March. Not only did the economy avoid a recession, it was a bit stronger than
expected, albeit resulting in a more persistent. level of inflation. Equities gained during the quarter, whereas bonds fell as
higher than expected inflation readings tempered expectations for imminent rate cuts.
Economic data throughout the quarter highlighted the ongoing resilience of the US economy as GDP growth posted a reading
above 2% for the sixth consecutive quarter, nonfarm payrolls were robust although the unemployment rate edged higher in
February, and the ISM manufacturing PMI signaled expansion after 16 straight months of contraction, rising into expansionary
territory in March. At the beginning of the year, the fed funds futures market had discounted six 25 basis point rate cuts
throughout 2024, but by the end of the quarter following hotter than expected inflation prints, this expectation narrowed to just
three implied cuts, bringing the implied path in line with the path first laid out by the Federal Reserve in December 2023.
During its March meeting, the Federal Reserve kept interest rates on hold at 5.25-5.50%, as Fed Chair Powell struck a nuanced
tone that balanced acknowledgment of the progress made with remaining work to be done in order to bring inflation back on a
sustainable path to the 2% target. The projections of Fed members continued to show 75bp of cuts in 2024, though the message
of policymakers throughout the quarter cautioned that the timing and actual number of cuts would depend on the data; they
want to have confidence that inflation is headed toward the Fed’s 2% target before cutting.
As the quarter progressed, treasury yields adjusted in recognition that the Fed may hold rates higher for longer, with the 2-year
and 10-year finishing 37 bps and 32 bps higher to 4.62% and 4.20%, respectively. High yield bond spreads narrowed by 24
bps, with the Barclays Aggregate Bond Index finishing the quarter down -0.78%.
Within the S&P 500, the “Magnificent 7” again posted strong performance in aggregate, though disparities within this group
began to materialize, with Nvidia notching a quarterly return of +82%, whereas three of the seven (Apple, Tesla and Alphabet)
failed to match the S&P 500’s quarterly gain of +10.55%. Both the Dow (+6.14%) and Nasdaq (+9.32) also posted quarterly
gains, whereas small cap stocks (+2.45%) underperformed large caps by more than 8%. Non-U.S. equities, represented by the
MSCI EAFE Index and MSCI Emerging Market Index, finished the quarter up +5.78% and +2.37%.
ALTERNATIVE INVESTMENT COMMENTARY*
Hedge funds started 2024 on a positive note, as the HFRI Fund-of-Funds Composite index rose 3.9% during the first quarter.
Volatility remained relatively low during the quarter as the U.S. economy continued to show resiliency amid higher rates.
Positive corporate earnings, the ongoing AI buzz, and the outlook for potential rate cuts also provided positive catalysts for
markets. However, “stickier than expected” inflation continues to be present in the U.S. economy, dampening expectations of
the number of rate cuts in 2024. High beta ‘Equity Hedged’ and ‘Event Driven’ strategies were among the strategies that
contributed positively to the quarter. The HFRI Equity Hedge (Total) Index and HFRI Event-Driven (Total) Index rose by
5.5% and 2.8% during the quarter, respectively. Additionally, Macro also performed well for the quarter as the HFRI Macro
(Total) Index rose 6.9%. Among the “all-weather” strategies, ‘Multi-Strategy’ hedge funds also provided a solid start to the
year. For the quarter, the HFRI RV Multi-Strategy Index rose 2.3%. Similar to the various indices, there was a dispersion of
performance across the Family Management platform. We are pleased the majority of our core managers were able to grow
capital in 2023 and carry that on into 2024.
*HFRI Performance numbers taken as of April 10th, 2024
This material contains the current opinions of Family Management Corporation and its affiliates (collectively, “FMC”), which may change without notice. This material is distributed for informational purposes only. It is not a recommendation or offer of any investment or strategy. Nothing herein shall be considered a solicitation to buy or sell, or an offer to buy or sell, to or from any persons in any jurisdiction where such solicitation, offer, purchase, or sale would be unlawful. Information contained herein has been obtained from sources believed to be reliable, but are not guaranteed. FMC provides no guarantees regarding the performance of any investment or strategy. Investing entails risks, including possible loss of principal. Past performance is no guarantee of future performance and individual client results will vary. No part of this material may be reproduced in any form, or referred to in any publication, without the express written permission of FMC.
