Global stock markets finished the quarter on a very strong note. The S&P 500 Index

rose 10.6% while the Dow Jones Industrial Average rose 6.1%. The NASDAQ

composite appreciated 9.3%. The MSCI All Country World Index rose 8.3% with the

Bloomberg U.S. Aggregate Bond Index falling less than one percent. U.S. Treasury

rates rose even as the yield curve remained inverted. The ten-year Treasury yield

at 4.2% was 32 basis points higher at quarter-end versus the prior quarter while

the two-year Treasury yield at 4.6% rose 37 basis points. Our view has not changed,

despite the rally in bonds, the treasury curve inversion connues to bode poorly

for the economy eventually. The three-month U.S.T bill at a yield of 5.37% is 117

basis points higher than the 10-year U.S. Treasury note (narrowing 29 basis points

from last quarter), historically a sign of a forthcoming recession. So far, this me

has been different, no recession on the horizon.

The Federal Reserve is done with further rate increases for this cycle. The FOMC

however connues to slowly reduce their bloated balance sheet. The markets

believe the FOMC will lower rates at least three mes (75 basis points) in 2024,

probably the later half of the year. This was a major reason for the market rally

this quarter. Unchanged from last quarter, we are not inclined to believe in the

three-me reducon. Rising levels of inflaon appear to have abated, maybe only

temporarily, although geng back down to FOMC’s target of two percent is

unlikely in 2024 or even 2025. As we have said ad nauseum, we have yet to see, in

the face of today’s rate of inflaon, now decelerang, the FOMC ghtening unl

they “broke” something. Could this mean a ‘so landing’ for the US economy is in

the offing? Apparently, the global equity markets have already made that


In light of the global rise in interest rates these past three years, we uncovered an

interesng factoid, in early 2021 there was approximately $18 Trillion innegavely yielding debt globally.

Today that stands at a few hundred billion and declining.

The second quarter of 2024 will bring new challenges to the economy and the

markets. As noted last quarter, increases in minimum wages in 27 states are

bringing price pressure to a variety of businesses who will need to either pass

along some, if not all, of those addional expenses or elect a reducon in


We believe market volality will connue to be a story in 2024. We are concerned

about a global equity and fixed income market correcon of even more substance

than occurred at several points in 2023. Valuaons, parcularly those that are

specifically technology related, are even more elevated than they were in 2022.

Six of the seven technology companies (formerly known as the ‘Magnificent 7’)

were responsible for the bulk of US equity market performance in 2024 to date.

Comparave valuaons to the 1999/2000 overvalued equity markets should not

be ignored. While fixed income rates have risen this quarter, the interest rate

spread between investment and non-investment grade securies is rather

narrow, not reflecng realies in today’s inflaon-fueled economy. The dollar

was stronger against world currencies this quarter, maybe that will last or maybe


And we repeat: The impact of the war in Ukraine cannot be assimilated into the

global economy with any degree of confidence even aer two years; nor can

Middle East violence. The human and economic tragedies are reminiscent of past

periods of violence and war. These horrors and the aermath of the pandemic

connue to reverberate in the global markets, cauon is warranted.

Our connuing search for and investment in undervalued assets requires paence

and a healthy dose of opmism for humanity.