March – May 2024

In the US, the S&P 500 rose +3.56% from 5,096 to 5,278, though it did endure a difficult April and fell -5.46% from 28th March to 19th April. Similarly, the S&P Euro Plus saw a rise of +3.42% from 2,476 to 2,561 whilst also enduring a slight drawdown of -3.12% from 28th March to 17th April. In the East, the Nikkei 225 was the odd one out in absolute performance after it fell -1.73% from 39,166 to 38,488.

Whereas market performance in March was relatively serene, April saw multiple events that unnerved investors. Tensions in the Middle East rose sharply when Iran launched over 300 missiles at Israel on 13th April, though 99% were ultimately shot down with no casualties. With allies urging calm, Israel did retaliate almost a week later, on 19th April, with a missile attack on Iran, prompting a negative impact on markets – specifically, Brent crude oil spiked +3.78%, and the S&P 500 dropped -3.05%. Fortunately, Iranian officials chose not to escalate the situation further, instead mocking the attack for causing no damage or casualties – an act which served to reassure markets, with the S&P 500 rising +6.25% through to the end of May. However, April also saw the US release another hotter-than-expected inflation print on 10th April, with it coming in at 3.5% against 3.4% expected. This further helped compound those mid-month negative returns and also meant that it was the fourth consecutive print which came in above expectations.

In contrast to the turn of the year when market participants were seemingly convinced that the Fed would lead other major central banks in implementing interest rate cuts (six were expected at the start of the year, whereas less than two are anticipated today), the macroeconomic environment has now shifted so that the European Central Bank, and even now the Bank of England, are looking much more likely to cut first. As of the end of May, European inflation has fallen to 2.6% – and has stayed below 3% every month since September 2023 – whereas in the UK, it has now dropped to 2.3%. Whereas the latter figure can be qualified by highlighting analyst expectations were 2.1%, this is still much more manageable and a far cry from the peaks of 11.1% seen in October 2022. In response to the evolving picture, ECB officials have been heavily flagging a first cut at their June meeting, with President Christine Lagarde stating it ‘would be appropriate’ to cut rates if policymakers were confident inflation was heading back to target.

Towards the end of May, political developments came to dominate headlines – with UK Prime Minister Rish Sunak confirming on 22nd May that Parliament would be dissolved and a general election would be held on 4th July, despite many predicting an election would not be held until the Autumn. The Conservatives have been consistently around 20 points behind Labour in opinion polls since the end of the Liz Truss premiership in October 2022, though time will tell whether his attempt to get on the front foot and call the election when Sunak has will see the gap close. He’ll no doubt be hoping the climate improves as his announcement not only whetted the appetite of many hoping for political change but also drenched his attire with heavy rain falling in London as the announcement was delivered.

In the US, on 30th May, ex-president and current Republican presidential candidate Donald Trump was found guilty by a unanimous jury verdict in New York of 34 charges of illegally influencing the 2016 election through hush money payments to adult film star ‘Stormy Daniels’. This is the first time a former president has been convicted, and despite his claims the trial was ‘rigged’, it is unquestionably a highly significant event in US political history. Whereas in the past, this would have undoubtedly signalled the end of a candidate’s ambitions for high office – Trump has made a habit of defying political gravity, and no conclusions should be made before polling day on 5th November. It is too early to properly digest the market impact of this verdict – though the S&P 500 certainly seemed unaffected after it rose +0.80% on the final day of the month.