The market dynamics show some interesting facts if seen from a bird’s-eye view. Artificial intelligence has created waves of excitement and bullish sentiment among investors, which in effect has played a key role in the growth of large-cap tech stocks. Much growth has been seen in the energy and communications sectors, but commodities have also performed well. The performance of commodities has surpassed that of the S&P 500, with a difference of 4.4% considering year-to-date (YTD) performance, as it is a key indicator for the evaluation of stocks. This year, Gold also outperformed the S&P 500 with a 12.% net increase.
Market sentiment sets the paradigm of markets
As we know, the first quarter of 2024 has closed, so earnings reports will follow soon. Expectations are for 4% growth in the first quarter, as experts envision it, as compared to the first quarter of 2023. This is not a big difference, but it is still on the bullish side. The figures can vary vastly when the actual figures roll out.
As we know, bullish sentiment remains longer than bearish as investors look for quick corrections and traders prefer hedges on every market dip. As investors fear the return of bearish trends, they don’t see each dip as an opportunity for buying. The put/call ratio also increased during the last week to 1.5, which means for every 1.5 calls for selling assets, there was 1 call for buying assets. It sounds a bit confusing, but simply put, it means that the investor’s sentiment is slowly turning bearish for the direction of the market. But it may change soon.
Top and worst performing sectors
Over the past three years, small cap stocks have performed well as compared to large cap stocks despite all the media buzz around large cap stocks. Though large stocks maintained their pace, they were not outperformers. If we focus on specific sectors, we can see that the energy sector has performed the best YTD by a huge margin. As crude oil prices are nearing $90, the energy sector might keep performing well despite the fact that not much growth is expected here.
This shows the vision of Warren Buffet never fades, as last year CNBC reported that Buffet’s Berkshire Hathaway Energy had purchased a 50% stake in an LNG facility, mentioning Bill Stone, chief investment officer at Glenview Trust, stating,
“It builds on their long-term theme of energy resources becoming more valuable and ownership of one of only a few US LNG exporters.”
The CNBC report also mentioned,
“Warren Buffett’s big energy and utility division bought the stake from Dominion Energy and will now own a 75% limited partnership stake in Cove Point LNG, located in Lusby, Maryland. A subsidiary of Brookfield Infrastructure Partners holds the remaining 25%.”
Source: CNBC
Communication services and industrial sectors are in second and third positions for the first quarter of 2024, with technology, financials, and materials also showing double digit gains. From the bottom, real estate is the worst performer, with a -2.32 percent decline in this sector. But if we look at the S&P 500, then real estate is at gains of 2.24%. Utilities is the lowest gainer with only 0.98 percent growth, and healthcare is above it with 2.95 percent growth.
After the stocks, if we look at the interest rates, they are higher and are not expected to decrease anytime soon. At last, investors were expecting a soft landing and wanted to prevent a recession, which seems obvious from the results. Inflation is expected to decrease over time, and the economy seems to be recovering better than before. Good expectations can be kept for the next quarter as it has already started, and the figures for the first quarter of 2024 can be expected to improve further as reports come into sight.
