---
title: Looking Back at the Markets in April and Ahead to May 2024
description: What are the current market expectations for May? Sam Millette, director of fixed income, takes a look ahead in his latest update.
image: https://blog.commonwealth.com/hubfs/Rebrand-Blog-Images/IMO-images/Look-Back-Ahead/look-back-ahead-b.jpg
---

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# [Looking Back at the Markets in April and Ahead to May 2024](https://blog.commonwealth.com/independent-market-observer/looking-back-at-the-markets-in-april-and-ahead-to-may-2024)

Posted by [Sam Millette](https://blog.commonwealth.com/independent-market-observer/author/sam-millette) 

This entry was posted on  May 7, 2024, 2:07:15 PM

 and tagged [Commentary](https://blog.commonwealth.com/independent-market-observer/topic/commentary) 

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![Looking Back and Ahead](https://blog.commonwealth.com/hs-fs/hubfs/Rebrand-Blog-Images/IMO-images/Look-Back-Ahead/look-back-ahead-b.jpg?width=300&height=200&name=look-back-ahead-b.jpg)

Markets pulled back in April, as high inflation and rising interest rates led to mid-single-digit declines for stocks during the month.

This result marked the first monthly decline for U.S. equities this year following a strong first quarter. International markets came in mixed, as developed markets were down in April while emerging markets saw a modest gain. Fixed income was also down for the month.

##### Looking Back

Interest rates and inflation. The March inflation reports showed signs of rising inflation, with year-over-year headline and core consumer prices rising more than expected. This stubbornly high inflation spooked investors, leading to higher interest rates and market volatility. The 10-year U.S. Treasury yield rose from 4.2 percent at the end of March to 4.69 percent at the end of April.

Faster economic growth. The hotter-than-expected inflation reports were due to strong economic growth during the month. Hiring surged in March, and consumer and business spending growth came in above expectations. While headline GDP growth slowed in the first quarter, the underlying consumer spending data showed signs of continued consumer demand to start the year. The solid economic growth and persistent inflation caused investors to reassess their views on the timing and number of rate cuts this year.

All eyes on the Fed. The Fed left interest rates unchanged at the end of the April/May meeting, which was in line with expectations. In his post-meeting press conference, Chair Powell indicated that central bankers will likely need to see further proof that inflation is falling before cutting rates. Futures markets ended the month pricing in between one and two interest rate cuts by the end of the year, down from the six rate cuts that were expected at the start of the year.

Solid earnings and fundamentals. Despite the pullback in April, equity fundamentals showed signs of improvement during the month. Earnings growth for the S&P 500 in the first quarter is coming in above analyst estimates, which is a good sign for long-term investors as fundamentals drive long-term performance. This result marked three consecutive months of solid earnings growth, and analysts expect to see further earnings growth throughout 2024.

##### Looking Ahead

Slowing growth ahead. While the economic data releases in April largely pointed toward continued economic growth, updates at the start of May painted a picture of potentially slower growth ahead. Hiring in April came in well below economist estimates, and business confidence fell into contractionary territory during the month. These reports were welcomed by investors, signaling that economic conditions may be heading toward a soft landing in the months ahead. If we continue to see healthy but slowing growth, it would likely support rate cuts sooner rather than later, which, in turn, would be a good sign for investors.

Domestic and international risks. Similar to what we saw in April, inflation and interest rates remain the primary risk for investors in May. That said, there are other risks that should be monitored as well. As we approach the November elections, we may see increased economic and political uncertainty here in the U.S. Additionally, there are several foreign risks to watch, including the continued conflicts in the Middle East, which could pressure already shaky global supply chains. Slowing growth in China and the ongoing war in Ukraine are also markets risks that should be monitored.

##### A Positive Outlook

Despite the sell-offs in April, the current outlook is largely positive. The economic backdrop remains supportive, and signs of a potential soft landing are encouraging. Consumer and business spending remain healthy, and the slowdown in hiring in April was a welcome development.

Additionally, solid earnings growth in the first quarter is a good sign that equity fundamentals remain sound. The most likely path forward is further economic growth and market appreciation, but as April reminded us, short-term setbacks are possible along the way.

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