Over the last 12 months, the global stock markets demonstrated remarkable resilience and growth despite several challenges, including persistently high interest rates, geopolitical instability, and contentious election cycles in the U.S. and abroad.
As we close out Commonfund’s fiscal year-end and the mid-point of the calendar year, it’s important to assess the current economic and market conditions before we embark on what could potentially be a volatile second half of 2024. There have been positive market surprises, certainly in equities, that investors are no doubt pleased with as the continuation of the strong performance of 2023 has led to new highs in the major domestic indices and strong returns globally. The S&P 500 advanced 24.6 percent in the past 12 months, led by big tech stocks, particularly those aligned with investor enthusiasm for artificial intelligence. The MSCI World Ex-US and Emerging Markets indices returned 11.2 percent and 12.6 percent, respectively. Fixed income markets were more mixed as duration exposure was volatile in response to rate uncertainty, while credit spreads have been contained. On the economic front, some data has been directionally disappointing. This shouldn’t be surprising given the long lag that exists between the tightening of monetary policy and eventual impact on the real economy at the micro level. It is possible that the delayed economic impact from higher rates has been exaggerated in this tightening cycle by the huge fiscal outlays of the Federal government. Nonetheless, even with the “long fuse”, the impact of rising rates is slowly feeding into the system.
