Schwab Intelligent Portfolios & Q1 2024 Market Performance¹

April 29, 2024
Stock markets around the globe marched higher in the first quarter of 2024, providing positive returns for most Schwab Intelligent Portfolios® to start the year.
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Stock markets around the globe marched higher in the first quarter of 2024, providing positive returns for most Schwab Intelligent Portfolios to start the year. Investor sentiment was buoyed by strong earnings and a U.S. Federal Reserve upgrade to its economic outlook, while standing by their expectation of three interest rates cuts this year.

How Did Financial Markets Do?

U.S. large cap equities led the way and delivered their best first quarter since 2019.

U.S. small cap stocks followed their remarkable surge in the prior quarter with another impressive showing, providing further evidence that the U.S. market rally has broadened beyond just a handful of mega-cap growth stocks. International large company stocks also gained, led by Japanese stocks which have benefitted from economic growth strong enough to prompt the Bank of Japan to increase interest rates for the first time since 2007. International small company and emerging markets stocks also rose modestly in the quarter. U.S. and International REITs fell modestly, partly due to higher interest rates, but U.S. REITs were also impacted by the Fed suggesting they wouldn't begin cutting rates until later in 2024.

Rising rates across the yield curve in the first quarter also pressured bonds, with most categories seeing declines. High yield bonds bucked the trend, as strong company earnings may result in lower default rates than the market expected. Cash yields were also strong and remain a key feature of Schwab Intelligent Portfolios.

The price of gold has risen nearly 40% since October of 2022, initially driven by a falling U.S. dollar, though more recent geopolitical tensions and the prospect of lower yields on bonds and cash in the future seem to be fueling the rally. In the first quarter, gold's 7.3% return trailed only U.S. large cap and U.S. large cap fundamental stocks. While some attribute the rise in gold to the unrest in the Middle East and Ukraine, others suggest that investors are anticipating the Fed engineering a "soft landing" and are on a spending spree that is simultaneously pushing stocks, cryptocurrency, and gold to new or recent highs.

Figure 1: Market performance (ranked by Q1 2024 total return)

Asset class Q1 2024 [Index Total Returns (%)] 1-Year [Index Total Returns (%)] 3-Year (annualized) [Index Total Returns (%)]
High-yield bonds 1.27 10.99 1.80
U.S. treasuries -0.64 1.21 -2.07
Emerging markets bonds -2.63 2.58 -3.19
Gold & other precious metals 6.54 11.85 9.40
Treasury Inflation-Protected Securities (TIPS) -0.08 0.45 -0.53
Emerging markets stocks 2.37 8.15 -5.05
Investment-grade corporate bonds -0.41 4.15 -1.86
U.S. large cap stocks 10.56 29.88 11.49
International small cap stocks 2.40 10.45 -1.36
Securitized bonds -1.24 1.96 -3.07
Municipal bonds -0.39 3.13 -0.41
International large cap stocks 5.78 15.32 4.78
U.S. small cap stocks 5.18 19.71 -0.10
U.S. real estate investment trusts (REITs) -0.36 10.36 4.10

How did Schwab Intelligent Portfolios do?

Returns were mostly positive for Schwab Intelligent Portfolios in the first quarter of 2024 with the exception of Some very conservative models predominately holding fixed income which posted negative returns. Growth models featuring higher allocation to equities performed best, while more bond-oriented and income models saw a more moderate return.

Looking ahead to Q2 2024

With the second quarter underway, the items we are watching closely remains the same as the beginning of the year: Fed policy, geopolitics, and election year politics. Not only will the U.S. have a presidential election this year, but roughly half the globe or over 60 countries will hold elections. Schwab Intelligent Portfolios are designed to help our clients navigate uncertain times in order to achieve their investment objectives. We believe that broad diversification, low costs, and periodic rebalancing are key features of a successful long-term investment plan.