In this issue we discuss reduced pessimism toward European equities, real yields, and whether an S&P 500 high is still ahead.

Europe Is Poised for a Catch Up (Redo)

Mark Luschini, Chief Investment Strategist

While we wrote about the improvement in Europe’s economy in last month’s publication, citing mostly soft factors such as rebounding investor and business sentiment and prospects of a mid-year rate cut, more recent developments further support a more positive outlook for the Old World.

To be sure, economic activity in the United States and Europe has been diverging for the better part of the last two years. This, in turn, has fed expectations that the growth gap between the two continents will remain wide. However, recent data suggests the difference in anticipated growth rates should narrow rather than expand. Therefore, in our judgment, there is a widening window for European equities to outperform.

Getting Real

Guy LeBas, Chief Fixed Income Strategist

We typically talk about nominal yields as the biggest source of returns in the fixed-income markets. However, nominal yields exclude the potential impacts of expected inflation. By contrast, real yields represent a concept that estimates forward-looking returns relative to inflation. Real yields emerged as a key focus area for fixed-income investors following the historic 2022-2023 Federal Reserve (Fed) rate hike cycle.

Real yields reflect the return investors can expect after stripping away inflation expectations, making them an essential benchmark for gauging true long-term returns. The calculation defines real yields as the difference between nominal Treasury yields and yields on inflation-linked Treasury Inflation-Protected Securities (TIPS) of the same maturity. TIPS yields represent expected real returns since the securities’ principal adjusts for changes in consumer prices.

The Best Is Ending — Or Not

Gregory M. Drahuschak, Market Strategist

Last month’s Investment Perspectives pointed out that April generally has been favorable for stocks. April 2024, however, failed to abide by its typical history as the S&P 500 ended the month with its fifth-worst result since 1950.

On a year-to-date basis, however, the cap-weighted S&P 500 posted a solid gain, but how it got there contrasted with how 2023 ended. The Technology, Communication Services, and Discretionary sectors topped the 2023 sector ranks. Communication Services maintained its ranking, but through this April, the Energy Sector leaped from tenth to the second spot while the Discretionary Sector dropped to 10 in the performance list of the 11 sectors.

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The information herein is for informative purposes only and in no event should be construed as a representation by us or as an offer to sell, or solicitation of an offer to buy any securities. The factual information given herein is taken from sources that we believe to be reliable, but is not guaranteed by us as to accuracy or completeness. Charts and graphs are provided for illustrative purposes. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation or needs of individual investors.


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Employees of Janney Montgomery Scott LLC or its affiliates may, at times, release written or oral commentary, technical analysis or trading strategies that differ from the opinions expressed within. From time to time, Janney Montgomery Scott LLC and/or one or more of its employees may have a position in the securities discussed herein.

About the authors

Mark Luschini

Chief Investment Strategist, President and Chief Investment Officer, Janney Capital Management

Read more from Mark Luschini

Guy LeBas

Director, Custom Fixed Income Solutions

Read more from Guy LeBas

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