We started the year with the threat of a soft landing for the economy. Fortunately, that did not materialize, and the economy in fact posted stronger results than expected. For the time being, the threat of recession seems to have diminished. While interest rates have not yet come down as much as initially expected, the fact they are no longer rising has reduced uncertainty and provided significant upside momentum. Central banks are still talking about cuts later this year which, if they materialize, should provide some more momentum. Inflation remains stickier than expected though and the timing of cuts could shift again.
Fund performance in 2024 started as strongly as last year finished and the bull kept running in the stock market. Even the threat of deferred interest rate cuts did not reduce its momentum. Our managers provided returns of 5.6% for the quarter, slightly shy of the benchmark for the period. With the S&P 500 up over 10% in the period, our lower exposure to some of these technology growth stocks accounted for the variance. Over the longer terms, our managers have continued to outperform the markets.
Of course, fund performance also needs to be viewed in the context of a small number of extremely high performing stocks. Now that TESLA has lost some of its shine, the Magnificent 7 has become the Super 6. Even with its inclusion, this group is up 13% year to date.
Fortunately, we tend to not ride this roller coaster. Our focus, through the managers we have selected, remains one of buying good companies at reasonable prices – value investing. This style has been out of favour for some time with many pursuing high growth alternatives. With new questions developing in the market, our strategy should serve us well. By maintaining a long-term view, we continue to benefit from market upside, while being attentive to the risks in any market or security.