Key Takeaways:

• • In January, rate cut expectations in the US had reached what we believed to be highly optimistic and unrealistic levels. Many were factoring in a first rate cut as early as March, and as many as 6-7 .25% cuts in 2024.

• • This helped spur on the advance in equities, but as the quarter played out, those expectations pushed out the likely date of the first rate cut, and drastically decreased the magnitude of cuts.

• • Since October/November 2023 consumer sentiment has increased, which reflects the “surprise to the upside” narrative which has gone on. The positive surprises in economic data, especially the US, lead to greater optimism, higher bond yields and a new “reflation” narrative in 2024.

• • GDP revisions have been positive, but the fuel being used for this GDP growth may have started to become a little less sustainable, as consumers have swapped a lot of their spending from excess savings to credit cards. – which we know is not sustainable for the long term. However, household wealth has also increased, making this more serviceable and offering the ‘wealth effect’ trickle down to the consumer.

• • Amongst 55 managers in the HUB24 Balanced SMA universe, 3 of Innova’s portfolios occupied the top 5 performance results for March. Over a 3 year period, we retain 3 portfolios in the top 10 performers.