Strong company earnings, improving economic data and broadly easing inflation, saw global equities leap 8.3%. Developed markets notably outperformed emerging markets with AI-related stocks continuing to generate great interest, especially in the US. Even so, Japan was the top-performing regional equity market. Against a backdrop of robust economic gains and changing expectations as to the timing of interest-rate cuts, government bonds declined while corporate bonds were mostly flat.
The Compass Portfolios delivered strong gains ranging from 3.9% for the Compass 3 Portfolio, to 7.1% for the Compass 5 Portfolio. The quarter saw a continuation of the heightened levels of investor risk-appetite – the so-called ‘risk-on’ sentiment – that lifted markets at the end of 2023, following the Fed’s surprise December pivot on the US interest-rate outlook. The expectation of interest-rate cuts to come, a slew of corporate earnings reports that delivered positive surprises, and inflation remaining contained, if not fully tamed, helped numerous regional equity indices to hit new all-time highs. Our equity holdings were by far the most dominant driver of returns, but all asset classes within the Compass Portfolios contributed positively, despite broader fixed-income indices either declining or remaining flat over the quarter.
