February – April 2024
The period from February to April 2024 was a generally positive one for investment markets, though April did see some drawdowns in previously buoyant indices. The S&P 500 reached multiple all-time highs and rose +3.26% from 4,846 to 5,036, though it did experience a fall of -5.46% from 28th March to 19th April.
Similarly, the S&P Euro Plus (ex-UK) saw a rise of +3.12% from 2,416 to 2,491 whilst also enduring a fall of -3.12% from 28th March to 17th April. Pleasingly from a UK perspective – the FTSE 100 had a strong three months, rising +6.73% from 7,631 to 8,144 – hitting new all-time highs in the process. However, the mid-cap dominated FTSE 250 did lag slightly, with a rise of +3.14% from 19,358 to 19,965.
Whereas market performance in February and March was relatively serene, several events in April gave investors reason to pause for breath. Perhaps the most significant of these came through the rising of tensions in the Middle East after Iran launched over 300 ‘missiles’ at Israel on 13th April. However, despite 99% of them being shot down and no casualties reported – the incident prompted widespread fears that this could spark increasingly violent escalations. With allies urging calm, it looked as though the time of greatest danger had passed – but in the early hours of Friday, 19th April, Israel retaliated by launching their own missile attack on Iranian soil. The market impact was unsurprisingly negative, with Brent crude oil spiking +3.78% in the immediate aftermath and the S&P 500 capping a difficult week by finishing down -3.05%. Fortunately, Iranian leaders decided not to react further – instead mocking the attack and highlighting that it caused no damage or casualties. For now, it seems any further escalations have been avoided – with the S&P 500 certainly having bought into this narrative after it rose +3.00% in the ten days following the attack.
Market drawdowns were also compounded by the US announcing another hotter-than-expected inflation print on 10th April, 3.5% against 3.4% expected. This was the fourth consecutive print coming in above expectations, with the October print (released in November) being the last that came in under expectations – and took on further significance as it again decreased the likelihood that the US Federal Reserve would implement multiple rate cuts in 2024, with money markets having moved from pricing in 6 interest rate cuts at the start of 2024, to less than 2 in the aftermath of the inflation print. Whereas it was expected that the US would lead the way with cuts this year, there is now a strong likelihood that both the Bank of England and European Central Bank will move first, with their own inflation rates sitting at 3.2% and 2.4% respectively.
Despite a difficult April, the new all-time highs reached by many developed market indices over the last three months have been very encouraging after a volatile few years. The Nikkei 225 has been the most noteworthy of these, with the index finally banishing the demons of its asset price bubble after the last all-time high was reached on 29th December 1989. In the UK, the FTSE 100 has tended to drift between 7,000 and 8,000 for much of the previous eight years – with drawdowns generally coming quickly after a new high had been reached. The index reached a fresh all-time high of 8,023.87 on 22nd April, driven by a weaker pound and easing tensions in the Middle East. As many large multinationals within the FTSE 100 conduct business overseas, a weaker pound makes their exported goods more affordable for foreign buyers and boosts the value of their international transactions.
Another pleasing and healthy feature for markets over the period has been solid earnings for US companies. February saw most of the ‘Magnificent 7’ perform well in their Q4 2023 announcements – with the standout results coming from both Nvidia and Meta. Indeed, the latter implemented a dividend for the first time in its history and announced $50bn worth of buybacks – packages which helped the stock soar over 20% the day after the announcement. For April’s Q1 2024 earnings, Alphabet has been the standout so far – following in Meta’s footsteps by implementing a $0.20 per share dividend and rising +9.97% the following day to rejoin the $2 trillion market cap club. Indeed, there could now be an argument that company fundamentals are once again driving markets, with Q1 earnings growth as of the end of April for companies in the technology sector up +22.2%, the communication services sector up +34.4%, and utilities up +23.9%. This presents a stark departure from recent years, where market performance was primarily dictated by the ebb and flow of macroeconomic conditions – with the focus for many asset managers having shifted towards the comments and policies of central banks, as opposed to the traditional emphasis on fundamental, company-specific research.
