Stocks soar on continued optimism, though Fed’s hesitancy challenges bonds

Market Review from the Westmount Investment Team

10 April 2024

Buoyed by the tremendous returns of 2023, investors entered 2024 with high hopes. Inflation was steadily trending down, interest rate cuts were looming large, and AI technologies were burgeoning, promising to enhance corporate profitability well into the future. Markets were clearly pricing in a “soft landing” for the U.S. economy, with the Fed’s prior rate hikes succeeding in slowing inflation but without sending the economy into a recession.

Investors had it partially right. While economic data came in above expectations and the promise of artificial intelligence supported a huge market advance in the first quarter, investors missed the mark about interest rate cuts as inflation remained above the Federal Reserve’s comfort level. The stock market enjoyed the spoils of a strong economy, while the bond market continued to struggle with higher rates.


In 2023, the stock market’s surge was driven primarily by the stellar performance of just seven technology-driven companies, dubbed “the Magnificent Seven.” Several of these stocks continued to shine in the first quarter, and they were joined by notable breakouts in other sectors like healthcare and financials. This produced a more balanced upward trajectory for the market. Hopes for a “soft landing” remained well within reach while the likelihood of a recession within the next 12 months noticeably dwindled.

Westmount’s stock portfolio strategically emphasized overweight positions in the sectors that performed best in the first quarter, thereby delivering yet another quarter of benchmark outperformance. Because of this overweight, Westmount’s stock portfolio was up +8.70%, outpacing the MSCI All Country World Index, up +8.20%.


Uncertainty over the path of inflation and interest rate moves did not derail the continued strong performance of income-oriented alternatives in the quarter. Readers of Quarter Notes know that for the past few years we have focused the alternatives portfolio on opportunities in private credit (corporate and real estate loans backed by tangible assets). As in previous quarters, the performance remained steady and strong as income from the loans continued to produce a diversified return stream to the overall portfolio. For the quarter, Westmount’s alternatives were up +2.21% in comparison to the Wilshire Liquid Alternative Total Return Index, which was up +3.16%.


While most parts of the financial markets were positive in the first quarter, the bond market encountered a familiar foe that it has battled for the past few years – namely, higher interest rates. The Federal Reserve decided to keep short-term rates steady while intermediate and long-term rates floated higher due to stickier inflation numbers and higher-than-expected economic growth. Over the past few years, we have positioned our bonds to have shorter maturities than the broader bond market (hence less interest rate sensitivity), while also taking on selective credit risk to outperform the bond market. While the bond market (as measured by the Bloomberg U.S. Aggregate Bond Index) was down -0.78% for the quarter, our bond portfolio was up +0.60%.

Given ongoing challenges in the bond market, our strategy for most of the past decade has been twofold: first, optimizing the positioning of our bonds relative to the bond market, as articulated above; and second, seamlessly transitioning client bond allocations into our alternative asset portfolio, which has offered bond-like income and risk mitigation, coupled with stock-like return potential. The impact of this strategy can be seen in the chart below:

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This report was prepared by Westmount Partners, LLC (“Westmount”). Westmount is registered as an investment advisor with the U.S. Securities and Exchange Commission, and such registration does not imply any special skill or training. The information contained in this report was prepared using sources that Westmount believes are reliable, but Westmount does not guarantee its accuracy. The information reflects subjective judgments, assumptions and Westmount’s opinion on the date made and may change without notice. Westmount undertakes no obligation to update this information. It is for information purposes only and should not be used or construed as investment, legal or tax advice, nor as an offer to sell or a solicitation of an offer to buy any security. No part of this report may be copied in any form, by any means, or redistributed, published, circulated or commercially exploited in any manner without Westmount’s prior written consent. Past performance is not an indication of future results.

Performance figures shown include the reinvestment of dividends and are net of all investment costs, including Westmount’s advisory fee. The performance figures above reflect the deduction of a 0.59% fee charged by Westmount, which represents the current average blended fee rate of Westmount’s aggregate clientele at this time. That blended fee rate varies over time, and in some periods has been higher or lower than the fee rate reflected in this report. Clients may have a higher or lower rate depending on their portfolio. Westmount’s fees are described in Part 2A of our Form ADV, which is available upon request.

The market indices shown are provided to assist clients in evaluating Westmount’s performance relative to the markets in which we invest. You cannot invest directly in an index. Westmount’s portfolios are not intended to perfectly mirror the relevant indices, may have more or less volatility than the indices, and may invest in markets and strategies not represented by any of the indices shown. The indices are unmanaged and do not carry fees or expenses.

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