By Michael Zacharia, Investment Analyst

Review of first quarter 2024

Consensus is that global interest rates have peaked for this economic cycle and their next move is downwards especially as inflationary pressures continue to abate and economic growth remain strong.

US, European and Japanese equities have all surprised on the upside whereas the UK has lagged behind following weaker economic growth and because inflation is falling more slowly compared to other developed economies. 

Source: BLS, Eurostat, LSEG Datastream, ONS, J.P. Morgan Asset Management. Core inflation excludes food and energy in the US, and food, energy, alcohol and tobacco in the eurozone and the UK. Past performance is not a reliable indicator of current and future results. JPMorgan Guide to the Markets – UK. Data as of 31 March 2024.

Fixed Income investments have not started the year as strongly as pricing initially reflected an overly optimistic outlook that interest rates will fall swiftly and sharply.

Lower interest rates are warranted but any unexpected jump in inflation could delay their start.  The trajectory for inflation though is downward and with moderating economic growth we expect the US could be first to lower rates.  This represents a favourable environment for US equities and fixed income. 

We are positive on US equities but have much broader global exposure as we see valuations outside the US as less ‘stretched’. 

If the last few years have taught us anything, it’s that risks are everywhere.  We remain vigilant over inflation, over valuations, over economic growth and over the huge number of elections this year.  In such instances, diversification remains key. 

It is difficult to say which equity market will perform best or whether Fixed Income will outperform Global Equities, but we do know that all will have their part to play at some point this year and beyond.  Furthermore, diversification is always beneficial as we navigate towards your longer-term objectives.

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