The first quarter of 2024 has been a blockbuster for most asset classes, sparking concerns about the sustainability of the uptrend.

But how long will the party last? What are the risks in an overbought market? Analysts and economists weighed in to dissect the rally and pinpoint potentially rewarding opportunities in the near to medium term.

Equity Market — Enduring Resilience: The equity market started off the year cautiously, casting doubts on the strength of 2023’s gains. However, the momentum from the previous year persisted, dispelling doubts and catapulting the market to fresh highs.

In the first three months, the S&P 500 Index hit record highs for both closing and intraday trading. Blue-chip stocks followed suit, with the Dow Jones Industrial Average also marking a new record by the end of the quarter.

While tech stocks surged, boosted by the AI frenzy, the Nasdaq Composite fell short of its all-time high due to concerns over valuations leading to profit-taking towards the end of the quarter.

Source: Benzinga

Unlike 2023, where the rally was primarily driven by tech, this time’s upswing is more widespread, drawing in a broader spectrum of participants.

LPL Financial‘s Chief Technical Strategist, Adam Turnquist, highlighted that the S&P 500 Index’s robust uptrend is backed by broad participation and cyclical leadership. “Improving relative strength in industrials, financials, and materials provides additional evidence of a bullish rotation that has largely been overshadowed by mega-caps and AI enthusiasm,” he noted.

AI anticipation fueled much of the early gains, with companies like Nvidia Corp. (NVDA) and Microsoft Corp. (MSFT) — pioneers in the AI domain — enjoying substantial year-to-date growth rates. Later in the quarter, the market received a boost from the Federal Reserve hinting at potential rate cuts.

The recent rally saw notable participation from industries like industrials, financials, and materials, shifting focus away from tech giants towards a broader market base.

The top three best-performing S&P 500 stocks this quarter came from the semiconductor sector, reflecting the significant impact AI has had on this industry. The list was led by Super Micro Computer, Inc. (SMCI), a debutant on the S&P 500, which surged over 255% year-to-date. Other top performers included Nvidia (+83%), Constellation Energy Corp. (CEG) with a 58% increase, Deckers Outdoor Corp. (DECK) up by 41%, and Micron Technology, Inc. (MU) showing a 38% rise.

Conversely, plagued by negative developments such as softening EV demand and supply bottlenecks as well as airplane safety worries, Tesla, Inc. (TSLA) and Boeing Co. (BA) were the weakest links in the S&P 500 chain, shedding 29% and 26%, respectively.

Other underperformers included cable telecom company Charter Communications, Inc. (CHTR), trading platform provider MarketAxess Holdings Inc. (MKTX), and medical specialist insurer Humana, Inc. (HUM).

Gold Shines Bright: Gold surged on the weakening dollar as expectations of a Fed rate cut, currently at 22-year highs, weighed on the greenback. The precious metal hit a record high of $2,254.80 by the quarter’s end, peaking at $2,256.90 intraday.

Bitcoin’s Rising Trajectory: The cryptocurrency realm gained momentum late in 2023, which carried over into the new year. After the awaited approval for spot Bitcoin (BTC/USD) trading, the market witnessed solid gains with some post-approval volatility. Despites some fluctuations, Bitcoin continued its upward march.