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18 April 2024

Market Update – March 2024

Financial markets continued their positive trajectory in March 2024. The MSCI World Index gained 3.1%, reflecting broad-based strength across developed markets. The S&P 500 also saw a 3.1% return, despite some weakness in tech.  Quality as a factor returned around 2.6% (up nearly 17% for the quarter) but was over-shadowed by Value, delivering 5.6%. Japan’s Nikkei 225 increased 2.8% while the ASX 200 mirrored much of the global strength, up 2.6%.

Specific to Australian equities, resources and small-cap stocks (again driven by value) outperformed the broader market.  Commodities were topical as Gold prices surged an impressive 7.2%, while oil prices rose over 6% due to ongoing geopolitical tensions and production cuts by OPEC+.

The continued global optimism is being fuelled by resilient economies, strong corporate profits, and a belief that central banks will blink and shift towards lower interest rates this year.  Yields on 10-year US Treasuries touched 4% briefly before moving higher and finishing the month at 4.2%.  Although well flagged, the Bank of Japan ended their 8 year experiment of negative interest rates, shifting the band to 0-0.1% with Governor Kazuo sighting rising wages and prices as the justification.

Looking ahead, we retain our view that market expectations of any rate cut quantum and timeline are too aggressive.  Inflation continues to persist in most major economies, driven in services, and now underwritten by wage rise agreements that are anywhere from 3 to 5 years in duration.  Governments continue to spend money attempting to appease swing voters in addition to energy transition challenges.

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