Weekly Market Update

April 2024 in review: Volatility and Mixed Economic Data

May 4, 2024

April 2024 was a tumultuous month for financial markets, characterised by significant volatility driven by mixed economic data, corporate earnings, and evolving expectations for interest rates and central bank policies.

Throughout the month, investors grappled with the push and pull between the potential for fiscal stimulus in the U.S. election year and the question of whether the economy was strong enough to stand on its own. Surprisingly strong U.S. wage data and retail sales figures painted a picture of a resilient economy, which paradoxically led to market gains despite the implication of further upward pressure on rates.

However, stronger-than-expected U.S. inflation data, with the Fed's preferred PCE inflation gauge showing prices rising at an annualised pace of over 4%, cast doubt on the Federal Reserve's rate-cutting timeline. This led to a rise in U.S. Treasury yields, briefly causing selloffs in equities.

Despite the challenges, the tech-heavy Nasdaq Composite recovered from being over 6% down to finish just 2% down while the broader S&P 500 ended down by a similar amount with a bit less volatility. Cheaper cyclicals like the UK, Europe and emerging markets showed more resilience, with the UK and emerging markets delivering a monthly gain of over 3%, boosted by slightly better news from China and a bouyant Latin America.

In Australia, the ASX 300 was also down recorded3% or so weighed down by REITs, Banks and smaller companies while Materials were steadier as Iron Ore prices stabilised.  The Australian dollar strengthened against the U.S. dollar, appreciating by 1.8% to reach US 65 cents, supported by higher iron ore prices and a softer USD.

Bond markets faced headwinds as yields climbed across the curve, reflecting the "higher for longer" rate environment. Australian 10-year yields rose 13 basis points to 4.52%, while U.S. 10-year yields added 5 basis points to reach 4.67%. High yield credit (+0.4%) outperformed both investment grade (-0.2%) and government bonds (-0.4%).

As April drew to a close, investors remained focused on upcoming central bank meetings, particularly the Fed, for clues on the rate outlook. The currentn US corporate earnings reports has also shone aspot light on the polarisation within the US economy and so far the indications are that this big tech will have to prop up the economy while cracks may be appearing in the strength of the US consumer.

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