Zephyr Financial Solutions

Growing Expectations for Rate Cuts Propel Global Markets

U.S. equities, measured by the S&P 500 index (+11.69%), closed out 2024 with a bang as investor expectations for rate cuts during the first part of 2024 grew. Developed global equities (MSCI World ex. US index +10.57%) also benefited from the growing sentiment that rate cuts were imminent. Meanwhile, emerging market equities (MSCI Emerging Markets index +7.93%) underperformed amid worries about the health of China’s economy.

The monetary policy shift to potential rate cuts on the horizon provided a boost for fixed income markets as the Bloomberg Global Aggregate index (+8.10%) posted its best quarterly performance in two decades.

The strong year for U.S. equities continued as the S&P 500 index capped off the year by posting a +11.69% return during the fourth quarter. Signals from the Federal Reserve that interest rate cuts were upcoming in 2024 boosted investor sentiment during the quarter. Inflation (consumer price index) cooled while the labor market remained tight during the last three months of the year. Interest rate sensitive sectors like real estate, information technology, and consumer discretionary outperformed while the energy sector posted a negative return as crude oil prices fell. As a result, it was a risk on environment with growth stocks (Russell 3000 Growth index +14.09%) outperforming value stocks (Russell 3000 Value index +9.83%) while small caps (Russell 2000 index +14.03%) outperformed large caps (Russell 1000 index +11.96%). Below are some of the strategies that make up the PSN Top Guns Small Cap Growth Universe.

  • Wasatch Global Investors: Wasatch Small Cap Ultra Growth (+18.8% for the quarter)
  • Franklin Templeton Investments: Franklin U.S. Small Cap Growth Equity (+17.9% for the quarter)
  • Jackson Square Partners, LLC: Small Cap Opportunities (+16.4% for the quarter)

The expectations that the interest rate hiking cycle in now complete also benefited developed equity markets as the MSCI EAFE index posted a strong +10.47% return. Cooler inflation in the U.S. and eurozone also supported share prices and contributed to the expectations that rate hikes are behind us. Despite struggles and uncertainty regarding China’s economy and real estate sector, the Middle East conflict and higher bond yields, the MSCI Emerging Markets index posted a solid +7.93% return. The following strategies made the PSN Top Guns list for the EAFE Universe.

  • Dundas Global Investors: International Capital & Div Growth (+17.7% return for the quarter)
  • The Ithaka Group, LLC.: Ithaka International Strategy (+16.6% for the quarter)
  • Sierra Investment Partners, Inc.: Franklin EAFE Plus Equity (+16.2% for the quarter)

The 10-year Treasury yield fell from 4.57% to 3.87% during the quarter due to growing sentiment amongst investors that interest rate hikes are over and cuts are on the horizon in 2024. The steep decline in yields and potential shift in the direction of monetary policy resulted in a very strong quarter for bonds across the globe. The Bloomberg Global Aggregate index posted an eye opening +8.10% return for the quarter while the Bloomberg U.S Aggregate came in at +6.82%. Below are some of the strategies that make up the PSN Top Guns International Fixed Income Universe.

  • Connor, Clark & Lunn Investment: CC&L Long Bond (+17.7% for the quarter)
  • State Street Global Advisors: Canadian Long Term Bond Index (+14.8% for the quarter)
  • Ninety One: Ninety One EM Hard Currency Debt (+14.2% for the quarter)


PSN Top Guns quarterly commentary is presented by Zephyr's Market Strategist Ryan Nauman whose analysis and research has been shared on financial industry media including WealthManagement.com, Reuters, CNBC, Bloomberg, MarketWatch.com, Yahoo! Finance, and the Wall Street Journal, while being a regular guest on TD Ameritrade Network, Yahoo! Finance, Bloomberg TV, Bloomberg Radio and Chuck Jaffe’s Money Life podcast.