MARKET COMMENTARY
The stock and bond markets had a rough start during the second quarter of 2024, with the outlook dimming for interest rate
cuts against a backdrop of stubbornly high inflation. However, by the end of the quarter, the outlook brightened as inflation
news turned favorable enough that investors began to gain confidence that the Federal Reserve could possibly move to lower
rates in September.
The US economy continued to grow at a solid pace, and though job growth has exceeded expectations for much of the past
year, the labor market has shown further signs of normalization, as unemployment, though subdued by historical standards, has
shown a recent upward bias, job openings have fallen dramatically from post-pandemic peaks, and wage pressures appear to
be easing. On inflation, the May Core CPI reading rose by only 0.2% month-over-month, which was below expectations and
the slowest pace since August 2021, and the year-over-year rate fell to 3.4%.
During its June meeting, the Federal Reserve maintained its cautious stance by holding rates steady, increasing its inflation
forecast, and reducing its outlook for 2024 to one cut from three. Following the cooler than expected May CPI print, the FOMC
stated there has been “modest further progress” toward the 2% inflation target in recent months, and Chair Powell noted the
CPI print was “certainly a better inflation report than almost anybody expected,” but he said officials still want to see inflation
slow further before lowering borrowing costs. Chair Powell’s colleagues echoed this sentiment in speeches following the
meeting, acknowledging that inflation was showing signs of cooling, but still wanting to see “more months” of similar data
before cutting interest rates.
Yields increased across most of the Treasury curve after rising in April and then pulling back as several inflation indicators
began to moderate, with the 2-year and 10-year finishing 13 bps and 20 bps higher to 4.75% and 4.40%, respectively, high
yield bond spreads widened by 6 bps, and the Barclays Aggregate Bond Index finishing the quarter up +0.07%.
Mega-cap stocks, fueled by AI enthusiasm, drove gains for the S&P 500 (+4.28%) and Nasdaq (+8.47%), whereas the value oriented
Dow (-1.27%) and small caps (-3.11%) struggled. Non-U.S. equities, represented by the MSCI EAFE Index and MSCI
Emerging Market Index, finished the quarter -0.09% and +5.35%, respectively.
ALTERNATIVE INVESTMENT COMMENTARY*
Hedge funds finished the first half of 2024 with mixed performance, as the HFRI Fund-of-Funds index rose +0.8% during the
second quarter. Volatility spiked in April as U.S. inflation measurements showed continue stubbornness and resilience amid a
high interest rate environment. However, shortly following this reading, volatility dropped for the quarter due to higher than
expected corporate profits, continued AI market hype and increased probability of a “soft landing”. Low beta strategy ‘Equity
Market Neutral’ was among the best-performing for the quarter as the HFRI Equity Market Neutral rose +2.7%. Among the
worst performing strategies were Event Driven and Macro as the HFRI Event Driven Index and HFRI Macro (Total) Index fell
-2.4% and -1.0%, respectively. Among the “all-weather” strategies, ‘Multi Strategy’ and ‘Fund of Funds’ protected investors
capital as the HFRI Multi-Strategy index and HFRI FoF index rose +0.8% and +0.3%, respectively. Similar to the various
indices, there was a dispersion of performance across the Family Management platform, and we are pleased that most of our
core managers protected and grew capital throughout the first half of 2024.
*HFRI Performance numbers taken as of July 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.
