Market Overview & Outlook Quarter 1 2024 (1 January – 31 March 2024) – The Rally Continues

In the first quarter of 2024, equity markets surged upwards, in particular North America, driven on by the ongoing artificial intelligence boom, Japan and Europe, with their respective stock markets returning an impressive 11.4% (S&P 500), 13.4% (Nikkei 225) and 11.3% (Euro Stoxx 50) in GBP. However, the UK equity market with its lack of listed technology companies lagged behind, as the FTSE 100 notched up still welcome gains of +3.99% for the quarter.

Economic data continues to paint a mixed, although generally still resilient, picture. That, alongside slightly ‘stickier’ than expected inflation data, has caused government bond yields to rise again, and investors have pulled back expectations for both the imminent start and the ultimate scale of potential interest rate cuts by central banks during 2024.

Elsewhere, there was no respite in the ongoing geopolitical conflicts around the world, and the second anniversary of the Russian invasion of Ukraine passed without any obvious signs of the conflict nearing a resolution.

Here in the UK, the most widely predicted recession in recent history finally arrived as GDP fell -0.3% in the final quarter of 2023, following a -0.1% contraction in the third quarter. While two consecutive quarters of negative growth fulfil the technical definition of a recession, it remains a highly unusual one given other datapoints that include an unemployment rate of just 3.8%, 932,000 job vacancies in the 3 months to January 2024, and annual growth for regular earnings of 6.2% in the final quarter of 2023. Some economists argue that the definition of a recession should be reassessed.

In the UK, we remain positive on the outlook for growth and corporate earnings looking forward. We expect such a scenario to be reflected in better UK equity market performance in the months ahead than we have seen at the start of 2024. The potential opportunity for UK assets consequently looks attractive, even if a degree of patience is required. The markets are anticipating a change of government in the UK later this year; this may provide the UK market with a fillip as the new government embarks on potential public expenditure benefiting businesses engaged in construction and infrastructure in particular.

In the US, the year is focused on the Presidential election in November. This may lead to an increase in volatility as the year progresses depending on political developments. Continental European bourses have performed strongly as European economies have overcome inflationary pressures resulting from the energy shock of 2022.

Just as investors have focused on the so-called ‘magnificent 7’ mega cap companies in the US (Microsoft, Meta, Amazon, Apple, Alphabet, Nvidia and Tesla), in Europe it is a group Goldman Sachs has dubbed the ‘Granolas’ (GSK, Roche, ASML, Nestle, Novartis, Novo Nordisk, L’Oreal and LVMH, AstraZeneca, SAP and Sanofi). These European companies include healthcare and consumer staples and consumer discretionary sectors, as well as technology; they have growth credentials, as well as stability in their earnings and the prospect of rising dividends.

Finally, Asian and emerging markets are performing better – in particular, India has delivered impressive returns with a strong growth trajectory. Even the Chinese market which has been under significant pressure has bounced off its lows in recent weeks as the Chinese government renews its focus on delivering economic growth by investing in new technology and innovation, including huge production of electrical vehicles.

Regardless of near-term pressures, over the medium term, we remain enthusiastic about the upside potential for global equity and bond markets, which should reward investors focused on growth markets.

Please note, our Market Overview & Outlook is our view of markets and does not constitute investment advice. Past performance is not necessarily an indication of future returns; the value of investments and any income from them is not guaranteed and can fall as well as rise. Overseas investments are affected by currency movements and exchange rates. If you would like investment advice on your individual circumstances, please do not hesitate to get in touch, telephone 01392 875500,

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