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The first quarter of 2024 has turned outto be a blockbusterfor 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 2023s 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 couldnt quite reach its record peak as valuation concerns prompted some profit-taking near the quarters 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 Financials 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

AI optimism drove much of the upside early in the quarter, with stocks such asNvidia Corp. NVDA andMicrosoft Corp. MSFT the ones at the forefront of the revolution clocking strong gains for the year. In the latter half, stocks received support from the Fed leaning toward rate cuts.Current LevelQTD Change2023 PerformanceNasdaq Composite16,379.46+9.11%+43.42%S&P 5005,254.35*+10.16%+24.23%Dow Industrials39,807.37*+5.62%+13.70%Russell 2,0002,114.35+4.31%+15.09%*record closing high

Three of the top five best-performing S&P 500 stocks this quarter belong to the semiconductor space, underlining the thrust AI has given to this sector. The list is led byS&P 500 debutantSuper Micro Computer, Inc. SMCI , which has gained over 255% year-to-date. The others on the list are: Nvidia (+83%) Constellation Energy Corp.CEG : +58% Deckers Outdoor Corp.DECK : +41% Micron Technology, Inc. MU : +38%

On the flip side,Tesla, Inc.TSLA andBoeing Co.BA , which were hit by negative headlines (softening EV demandand supply-side bottlenecks;airplane safety concerns), were the worst S&P 500 stocks, shedding 29% and 26%, respectively, for the quarter.

Cable telecom companyCharter Communications, Inc.CHTR , trading platform providerMarketAxess Holdings Inc.MKTX , and medical and specialty insurance products companyHumana, Inc.HUM rounded up the list of worst performers.

Golds Dazzling Run:Gold rode on the dollars 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 LevelQTD Change2023 PerformanceGold futures (Price/troy once)$2,254.80*+8.83%+13.45%*record closing high

Bitcoin Builds On Gains:The crypto space began to see an accelerated rally in late 2023, and the gains continued into 2024. In the run-up to the spotBitcoinBTC/USD approval, the space saw solid gains, and the momentum stalled in a typical sell-the-news move after the approval came through. Bitcoin, the apex crypto, has since then pushed higher amid some volatility.

Bitcoin has amassed a market cap of over $1 trillion, reflecting the strong upside seen since the start of 2023.Current LevelQTD Change2023 PerformanceBitcoin$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 theSPDR S&P 500 ETF TrustSPY as the proxy for the performance of the S&P 500 broader gauge, we see that Bitcoin has been the best bet for investors.

Heres how much a $1,000 invested in each of the following during the start of the year would have returned now:AssetInitial InvestmentCurrent ValueReturnSPY$1,000$1,103.9010.39%Gold$1,000$1,080.408.04%Bitcoin$1,000$1,673.8467.38%Loading… Loading…

What Does The Future Hold?Most analysts are bullish on the rally extending through the rest of the year. However, inflation and the Federal Reserves actions are seen as key drivers for the financial markets.

Larry Tentarelli, Chief Technical Strategist atBlue 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 markets course.

Charlie Ripley, Senior Investment Strategist forAllianz Investment Management, agreed with Tentarelli. He emphasized the Federal Reserves actions as the most significant influence on the market. The current stance from the Fed is that they will follow through with 3 rate cuts this year, but sentiment could shift quickly if inflation measures remain sticky and the Fed is forced to stay on hold for longer, he said. Ripley, however, flagged concentration risk. Any faltering on the earnings front could pose a risk to the rally, he said.

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.META ,Arista Networks, Inc.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.

Fund managerLouis Navelliersaid he sees earnings estimate revisions likely to be the main market driver in the near term. He also noted that the next two quarters will have easier comparisons, making the bar manageable to scale. There is a fear of missing out, you know, with the Nvidia and super microcomputer strength, but there are other hot pockets, Navellier said, referring to weight-loss drug companies such asNovo Nordisk A/SNVO andEli Lily & Co.LLY . Among the other stock picks flagged by Navellier were: Cloud security companyCrowdStrike Holdings, Inc.CRWD andFortinet, Inc.FTNT AI names Nvidia and Super Micro Norwegian provider of browser and mobile browsersOpera LimitedOPRA Homebuilders, particularlyToll Brothers, Inc.TOL Consumer companies with a direct model, especiallye.l.f. Beauty, Inc. ELF Oil refiners

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