The 1% Move Report

Timely commentary on market performance whenever the S&P 500 changes more than 1% in a day.






Wealth Management — April 30, 2024

Source: Bloomberg, Morgan Stanley Wealth Management Global Investment Office (GIO). Data as of April 30, 2024.

What Happened in the Markets?

  • The S&P 500 fell 1.6% Tuesday to end the day at 5,035.69, having gained 5.6% thus far in 2024.
  • All of the 11 S&P 500 sectors were lower on the day, as Health Care (-0.1%) and Consumer Staples (-0.4%) were the strongest-performing S&P 500 sectors, while Consumer Discretionary (-2.7%) and Energy (-2.9%) underperformed.
  • By the 4:00 p.m. equity market close, the US 10-year Treasury yield increased 6bp to 4.68%; WTI crude oil decreased to $81.63 per barrel; and gold decreased -1.9% to $2,292.19 per ounce.

Why Did This Move Happen?

  • The S&P 500 sold off on the last day of April, marking its first monthly decline since last October. Higher-than-expected wage data renewed concerns about persistent inflation ahead of tomorrow’s Federal Reserve rate decision.
  • The Employment Cost Index rose 1.2% for the first quarter, exceeding consensus expectations for a 1.0% increase. After the report, yields jumped higher, with the two-year treasury yield crossing above 5%.
  • Additionally, the Conference Board Consumer Confidence Index fell to 97.0 in April, its lowest level since July 2022. Consumers indicated worsening views of the labor market and their outlook for the economy.
  • In another sign of potentially stagnating growth, the Chicago PMI dropped to 37.9 in April, down from 41.4 in the prior month.

S&P 500 vs. 50-, 100-, and 200-Day Moving Averages

Source: Bloomberg and Morgan Stanley Wealth Management GIO. Data as of April 30, 2024.

How Does the Move Relate to Our Tactical Positioning?

  • The GIC recommends preparing for sideways-churning markets, neutralizing portfolio tilts versus benchmarks and erring on the side of asset class diversification. With megacap and large-cap stocks likely continuing to trump small caps, add international exposure, stay neutral-to-underweight duration in rates and corporate credit, and use real assets and hedge funds to help mitigate emerging risks. Today's move does not meaningfully impact the GIC’s outlook. 
  • Please find more information on the GIC's tactical positioning on the next two pages and reach out to your Morgan Stanley Financial Advisor to discuss portfolio strategies.


US: We recently closed our US large-cap equity underweight, which was premised on concerns about achievability of 2023 earnings estimates. While higher inflation should delay Fed rate cuts, more pricing power contributes to confidence that has risen, given GDP strength and visible international growth rebounds. Our preference is for cyclical and secular-growth equities with quality balance sheets.

International Equities (Developed Markets): Given weak currencies and dovish central banks—in Japan and soon in Europe, with the ECB likely cutting in June—economic rebound should be at hand in the second half. Developed market exposure should skew toward commodities and materials exporters, especially those in the Asia Pacific region, including Japan.

Emerging Markets: Peaking US rates and, in turn, the US dollar, likely set up a second half rebound for EM ex China, given improving global growth dynamics. We favor Brazil, India and Mexico.

The Global Investment Committee's Tactical Asset Allocation Reasoning

Source: Morgan Stanley Wealth Management Global Investment Office as of April 19, 2024.

Fixed Income

US Investment Grade: Stronger-than-anticipated economic growth is preserving the strength of corporate cash flows. While rates have backed up to reflect "higher-for-longer" expectations, yield spreads have remained well behaved. With geopolitical uncertainty high and equity valuations broadly rich, we like coupons of bonds with index-matching or shorter durations.

International Investment Grade: Yields are decent, central banks may soon cut rates and there is room for spread tightening as economic growth improves.

Inflation-Protected Securities: Real yields have sold off and are now bordering on cheap relative to the past two years. The securities could be a potential buy in a stagflationary environment

High Yield: We have eliminated our exposure to the equity-like asset class to reduce equity beta of portfolios. High yield bonds rallied aggressively after the unprecedented provision of liquidity from the Fed and fiscal stimulus from Washington. However, there is currently limited upside and much downside to investments in riskier products, given the market environment.


REITS: We expect higher stock-bond correlations, which place a premium on the diversification benefits of investing in real assets. Nevertheless, with real interest rates positive and services inflation remaining quite sticky, we would need to be selective in adding to this asset class.

Commodities: Global reflation, tense geopolitics, especially in the Middle East, and ongoing fiscal spending suggest decent upside potential for precious metals and industrial-related commodities, including energy.

MLP/Energy Infrastructure: We are increasing exposure to real assets, with a preference for energy infrastructure and MLPs. Competitive yields and expectations for continued capital discipline amid stable oil and gas prices over the next six months underpin our decision, as does hedging against geopolitical risks.

Hedged Strategies (Hedge Funds and Managed Futures): The current environment appears constructive for hedge fund managers, who are frequently good stock pickers and can use leverage and risk management to potentially amplify returns. We prefer very active and fundamental strategies, especially high-quality, low beta, low volatility and absolute return hedge funds.

Morgan Stanley & Co.’s Key Market Forecasts

Source: Bloomberg and Morgan Stanley Wealth Management GIO. Data as of April 30, 2024.

Market data provided by Bloomberg.

Dallas Federal Manufacturing Index is released every month. It reflects overall business conditions and activity in the Texas' manufacturing sector.

Dow Jones Industrial Average (DJIA): A price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry.

NASDAQ Composite Index: A broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market.

S&P 500 Index: The Standard & Poor's (S&P) 500 Index tracks the performance of 500 widely held, large-capitalization US stocks.

US Trade-Weighted Dollar Index: A weighted average of the foreign exchange value of the 17US dollar against a subset of the broad index currencies that circulate widely outside the US.

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