Q1 2024 In Review and Q2 Market Outlook

The bull kept running in the stock market in early 2024. Even the threat of interest rates staying higher for longer didn’t trip up its solid performance. Stocks staged impressive returns in the first quarter, gaining over 10%, taking total returns to just shy of 30% over the last 12 months.

Stock prices pushed higher in the first quarter despite diminished expectations for Federal Reserve rate cuts in 2024. Gains were led by technology stocks, especially the companies seen as most likely to benefit from the artificial intelligence boom. Value stocks also joined in the rally. Meanwhile, the bond market’s performance was dented by the prospect of the Fed putting off rate cuts until the middle of the year.

As the second quarter gets underway, what’s the outlook for the stock and bond markets? What stock sectors are most attractive? What should investors do from here? We’ve gathered insights and perspectives from analysts and specialists about market performance, individual stocks, sectors, and mutual funds.

Q1 2024 Market Performance and the Economy

Investors went into the first quarter optimistic that a soft landing was in store for the economy, whereby a recession would be avoided, inflation would continue to improve, and the Fed would start cutting interest rates in March. Not only has the economy avoided recession, but it’s been stronger than expected. Meanwhile, inflation has again turned sticky. That means Fed rate cuts have been pushed out to at least June. Investors previously priced in five cuts in 2024, but expectations now center on three at best.

Here is our look at the big market and economic trends from the first quarter, as well as Morningstar’s market outlook for the second quarter and beyond.

Q1 2024 Stock Performance and Sector Outlooks

Which stocks did best in the quarter? Which have taken the biggest beating? Which sectors and stocks should long-term investors be looking to buy now?

Here we dive deeper into the performance of sectors and individual stocks, along with the outlook for the second quarter and Morningstar analysts’ top stock picks.

Q1 2024 Mutual Fund Performance and Top Picks

For mutual fund investors, the story has been the continued strong performance of funds focused on growth stocks. However, in contrast with other periods of growth stock gains, value funds have also perked up.

Bond funds had a rougher quarter, with those most exposed to changes in interest rates posting losses. Strategies heavy on corporate bonds and other credit investments fared better, thanks to the economy’s strength.