While stocks have recovered well beyond their second-half-2023 drawdown, bonds of longer durations have struggled this year. The first quarter saw global stocks further Q4 2023 gains, with the U.S. again dominating the leaderboard. Growth stocks extended a substantial lead over Value in the first quarter, expanding a historical gap. Meantime large-cap stocks soared above smaller names. Relative performance abroad was broadly similar to the U.S. in the first quarter, though the full-year figures favor our preferred exposures to smaller, less expensive stocks.

Within fixed income, relative performance yet again reflects the challenge in timing shifts in interest rates. Those who had bet on a more rapid decrease in yields likely failed to see those wagers pay off. While not near the peaks set last October, yields have marched higher as investors have come to accept stickier inflation and have gained a general sense that longer-term yields may want to be higher than those we saw since the Great Financial Crisis.