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Our monthly market update.
Ongoing investor optimism about the economic outlook was supportive to most risk assets in May. Developed market equities rose in May and outperformed emerging markets.
Investors also now anticipate that US interest rate cuts may come later than in other regions, such as Europe and the UK. Despite investors continuing to anticipate interest rate cuts, bond yields, in general rose, which led to a fall in price. However, there was regional divergence in bond markets, with some markets seeing gains.
With the exception of the UK, developed market equities fell in April as market expectations of interest rate cuts in the US receded. However, Emerging market equities, including China, produced positive returns in April. Global bond prices fell as yields rose.
It was a strong first quarter for global equity markets. Most markets registered strong gains as the US economy remained resilent and is unlikely to enter recession. Furthermore, equity returns were fuelled by the clamour for Arificial Intelligence stocks.Whilst expectations of interest rate cuts also initially boosted equities. However, as the quarter passed, it became more likely that the pace of cuts would be slower than investors had hoped for at the start of 2024. These interest rate cut expecyations meant that global bonds posted negative returns in the quarter, with yields rising and prices falling.
Global stock markets gained in February with emerging markets performing strongly as Chinese shares experienced a rebound. US equities also continued their upward trend, with the S&P 500 Index achieving record high closing levels during the month.
By contrast, global bond yields generally rose, which meant prices fell as investors pushed out their expectations of when central banks will cut interest rates.
Equity markets in January were mixed, in the main, developed markets posted gains, whereas emerging markets declined, albeit there were regional variances. Markets in general were volatile, especially as the signals from the central banks were that the anticipated interest rate cuts may not be forthcoming as early as previously expected.
Government bond yields rose, which meant prices fell. Furthermore, oil prices rose amid the ongoing conflict in the Middle East and continued disruption to shipping.
Q4 2023 saw strong performance for global equities and bonds. Markets reacted positively as the US Federal Reserve (Fed), signalled interest rate cuts may be on the way for 2024, which was further fuelled by falling rates of global inflation, despite the backdrop of slowing global growth. There were regional disparities in equities, as developed markets outperformed emerging markets and ongoing concerns over China’s real estate sector and limited government policy intervention, impacted investor sentiment. Global bond yields fell over the quarter, which reflected a subsequent rise in price.
November was a positive month for equities as slowing inflation in the US and other regions gave rise to hopes that interest rates may have reached their peak. Chinese equities bucked this trend, as limited Government stimulus did not appease investor concerns about lacklustre economic growth.
Global bond markets benefitted from falling yields, which meant prices rose. This reversed the trend of recent months, where yields had continued to creep up and prices fall.