Market summary – Review of Q1 2024

Despite downward revisions to the expected pace of US interest-rate cuts, US equities surged 11.4% over the quarter on the back of robust corporate earnings and resilient economic numbers. The Magnificent Seven were especially prominent. Sector wise, the best returns came from communication services, energy, technology, and financials. Meanwhile, more interest-rate sensitive sectors, such as real estate and utilities, struggled.

European equities trailed those in the US and Japan but still delivered a 7% gain. As in the US, tech stocks led the field thanks to the ongoing exuberance for all things AI. Stocks in the financials, consumer discretionary and industrials sectors also prospered against a backdrop of steadily improving economic data and declining inflation, which boosted cyclical stocks. Stocks in the utilities, consumer staples and real-estate sectors trailed.

The UK equity market also trailed once more. It returned 3.7%, partly due to its high weighting to value stocks during an ongoing rally in growth stocks. The mood was further spoiled by data showing the UK economy fell into a technical recession in the second half of 2023 as consumer spending struggled in the face of higher inflation and interest rates. Cyclical stocks, such as financial, industrial and energy companies, generally outperformed.

Emerging markets gained 3.4%. Despite leaping 9% in February, Chinese equities finished the quarter down 1.3%. Peru was the top performer. Like Columbia, it benefited from interest-rate cuts. Conversely, Turkey performed well after recent rate hikes, which were welcomed by investors as a return to conventional monetary policy. Taiwan and India also outperformed. While Korea, South Africa and Brazil all trailed, Egypt was the worst performer.