Financial markets underwent a sizeable shift in the fourth quarter. Treasury yields, which spiked in Q3, precipitously dropped as inflation eased and the Federal Reserve hinted at interest rate cuts in 2024. The Fed’s telegraphed “pivot” and the continued deceleration of inflation unleashed a melt-up rally across both equities and fixed income: the S&P 500 gained +11.7% during the quarter, and bonds produced their best quarterly return since Q2 1989 (+6.8%).
