The S&P 500 posted a 3.2% total return in March, marking its fifth consecutive month of gains This surge, translating to a 26% increase over the past five months, places the rally in the 98th percentile historically since 1936, Bank of America strategists highlighted in a Monday note.
In particular, the equal-weighted S&P 500 index outperformed for the first time this year by 1.2 percentage points, recording a 4.5% gain, with 60% of stocks surpassing the S&P 500's performance after a period of limited breadth.
Gold emerged as the top-performing asset class with an 8.1% gain and remains the leading asset class with a 31% increase since the end of 2021, compared to the S&P 500's 14%.
International equities slightly outpaced U.S. stocks, showing a 3.4% gain in local currencies and 3.2% in USD. Moreover, long-term Treasury bonds saw a 1.1% increase, investment-grade credit rose by 1.2%, and cash yielded a 0.4% return.
Sector-wise, Energy led the March rally with a 10.4% increase, as West Texas Intermediate (WTI) crude oil prices surpassed $80 per barrel for the first time since October 2023, marking a 6.3% rise for the month.
The Materials sector also saw a significant rally, gaining 6.2%. Other cyclical sectors such as Financials and Industrials outperformed as well, with increases of 4.7% and 4.3% respectively.
Interestingly, Utilities were the second-best performer, achieving a 6.3% gain.
“Communication Services (+4.3%) also outperformed, but Tech lagged (+1.9%). Consumer Discretionary was the worst-performing sector (flat in March),” strategists noted.
BofA said all three of its quantitative models are in an upturn, historically indicating a period where cyclical and value stocks tend to outperform growth stocks. This includes the Global Wave, US Regime Indicator, and European Style Cycle models.
In March, this trend was evident as the Russell 1000 Value index, with a total return of 5.0%, outperformed the Growth index, which had a total return of 1.8%, by a margin of 3.2 percentage points. That represents the largest outperformance since December 2022.
“It was also the first month Value beat Growth YTD. Similarly, Value was the best-performing factor group (+7.4%), followed by Corporate Cash Deployment factors (+6.3%),” added strategists.
In addition, risk factors saw their first outperformance of the year last month, recording a 6.2% gain. Conversely, profitability-based Quality factors, which were the top performers last year with a 25% gain, lagged behind as the worst performers this March with only a 2.9% increase.