Market insight April 2024
In this market insight April 2024, we found it was a challenging month for both growth and defensive assets. Investor sentiment continues to be driven by central banks and economic data. US inflation numbers and weaker GDP numbers led to concerns that the world’s largest economy will not be cutting interest rates as quickly as previously hoped sparking the declines in equities and bonds.
Inflation data and global markets
The latest inflation prints have caused a deviation in interest rate expectations across the developed world and the US saw inflation creep higher to 3.5% with utility and housing costs remaining higher than expected. Couple this with the weaker GDP numbers and it’s easy to surmise that the worlds largest economy will not be cutting rates as early as expected.
It was a different story however in the UK, where inflation fell to its lowest level in two-and-a-half years, driven by a slowdown in food price increases. Eurozone Inflation data in April remained flat at just above 2% year on year, with core and services inflation both slowing.
This means markets are more confident of a rate decrease this year from the European Central Bank and the Bank of England than the US Federal Reserve, with the former signalling for a June cut.
First quarter earnings in the US saw companies generally beat modest expectations. However, given the valuations, any companies that missed their estimates saw their share prices treated harshly. Elsewhere, commodities performed well over the month on the back of tensions in the Middle East and the broader positive economic picture. Commodities also helped emerging markets perform better than developed markets, China also bounced from its recent lows.
Factor performance and defensive assets
Looking at factor performance, the value factor performed the best over the month, although ended lower overall. In comparison, the growth and quality factors reversed some of their gains seen in the first quarter of the year.
Turning to defensive assets, concerns on the resumption of a ‘higher for longer’ interest rate policy from central banks, particularly the Federal Reserve, continued to drive near term fixed interest pricing.
Market insight April 2024 – an interesting second quarter
In summary, five consecutive positive months came to an end for global growth assets in April. As we move through the second quarter of the year, we will now be watching the correlation between equities and bonds closely. As markets try to balance economic growth with the direction of interest rates, we’re poised for an interesting second quarter.
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