The first quarter of 2024 has turned out to be a blockbuster for most asset classes, and the strong performances have left investors worried about the sustainability of the uptrend.
How long will the party last? What are the risks involved in investing in an overbought market? Benzinga collated views from analysts and economists to make sense of the rally so far and zero in on the opportunities that could pay off in the near to medium term.
Equity Market — From Shaky Start To Strong Surge: The equity market kicked off the new year with a whimper, with concerns that 2023’s gains might not hold. However, the momentum from last year carried through, quashing skepticism and propelling the market to new highs.
Three months in, the S&P 500 Index has notched record highs for both closing and intraday trading. Blue-chip stocks mirrored this performance, with the Dow Jones Industrial Average closing the quarter at a fresh record.
Tech stocks were once again at the forefront, fueled by the AI boom that spurred gains for companies of all sizes. However, the tech-heavy Nasdaq Composite couldn’t quite reach its record peak as valuation concerns prompted some profit-taking near the quarter’s end.
Source: Benzinga
The more heartening aspect of the recent rally is that, unlike in 2023 when it was nearly exclusively fueled by tech, this time around, the participation has broadened.
LPL Financial‘s Chief Technical Strategist, Adam Turnquist, said in a recent note that the strong uptrend in the S&P 500 Index is supported by broad participation and cyclical leadership. “Improving relative strength in industrials, financials, and materials provides additional evidence of a bullish rotation that has largely been overshadowed by mega-caps and AI enthusiasm,” he said.
See Also: Investing In Stocks For Beginners
Gold’s Dazzling Run: Gold rode on the dollar’s weakness as the greenback took a hit from expectations that the Fed is ready to cut the Fed fund rate, which currently hovers at 22-year highs. The yellow metal shares an inverse relation with the dollar as it is denominated in the latter.
The precious metal ended the quarter at a record high of $2,254.80 and on an intraday basis, it peaked at $2,256.90 on Thursday.
| Current Level | QTD Change | 2023 Performance | |
| Gold futures (Price/troy once) | $2,254.80* | +8.83% | +13.45% |
Bitcoin has amassed a market cap of over $1 trillion, reflecting the strong upside seen since the start of 2023.
| Current Level | QTD Change | 2023 Performance | |
| Bitcoin | $70,744.95 | +67.38% | +155.42% |
Source: Benzinga
Since crypto trading is a 24/7 market, three more sessions are left before the quarter ends.
Which Yielded Better? Comparing investment returns of the three asset classes by taking the SPDR S&P 500 ETF Trust (NYSE:SPY) as the proxy for the performance of the S&P 500 broader gauge, we see that Bitcoin has been the best bet for investors.
Here’s how much a $1,000 invested in each of the following during the start of the year would have returned now:
| Asset | Initial Investment | Current Value | Return |
|---|---|---|---|
| SPY | $1,000 | $1,103.90 | 10.39% |
| Gold | $1,000 | $1,080.40 | 8.04% |
| Bitcoin | $1,000 | $1,673.84 | 67.38% |
What Does The Future Hold? Most analysts are bullish on the rally extending through the rest of the year. However, inflation and the Federal Reserve’s actions are seen as key drivers for the financial markets.
Larry Tentarelli, Chief Technical Strategist at Blue Chip Daily Trend Report, shared exclusive comments with Benzinga. He highlighted incoming inflation data, especially the Consumer Price Index and Personal Consumption Expenditure Index, as crucial factors. Additionally, economic data on GDP growth, non-farm payrolls, and 10-year Treasury bond yields will be closely watched to determine the market’s course.
Tentarelli said he is very bullish on U.S. large caps, based on easing bond yields and inflation, and the earnings season, which starts in mid-April. The analyst sees further momentum for AI stocks much against fears of a bubble burst. “We are very bullish on the AI stock leaders and think that valuations are very reasonable here,” he said.
Tentarelli named Nvidia, Microsoft, Meta Platforms, Inc. (NASDAQ:META), Arista Networks, Inc. (NYSE:ANET), and Super Micro as his AI stock picks.
He is also exceedingly bullish on Bitcoin and expects the apex cryptocurrency to rally past $100,000 by the year-end. The upcoming Bitcoin halving, expected around April 19-20, could be the catalyst driving it higher, although he advised keeping an eye on bond yields.
“The one caveat here is for bond yields to not break out over 4.40[%],” he said.
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