March 2024 Market Insights
Developed markets continued their rally in March and rounded off a strong 1Q of 2024.
Written by Kevin Hua Co-founder & Chief Investment Officer
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What happened to the markets in March 2024?
Developed markets continued their rally in March and rounded off a strong 1Q of 2024. The resilience of the global economy, strong corporate earnings especially in the technology sector and expectations of interest rate cuts later in 2024 all contributed to the positive momentum.
The best performers during the month were Germany’s Deutsche Boerse Index and the U.K. FTSE 250 Index, which were up +4.61% and +4.36% (local prices) respectively.
The only negative performance was from China’s Shanghai Index, down -0.15% (local price). The +0.29% gain by the AUD against the USD, took away some of the AUD returns for the Trends and indices.
U.S. continues its positive momentum
Equities capped off a strong 1Q of 2024 with another positive month as companies reported strong corporate earnings, particularly in the technology and consumer discretionary sectors and growing expectations of interest rate cuts later in the year.
With rates on hold in January and a March cut also unlikely, investors focused on the underlying economic data, which was generally strong. Inflation rose slightly to 3.1% while new job numbers came in above expectations.
The U.S. Federal Reserve kept interest rates on hold at 5.25% to 5.50% as inflation rose slightly to 2.5% year-on-year in February, from 2.4% in January. Other economic data suggested ongoing resilience with annualised GDP growth for 4Q being revised up to 3.4% and the manufacturing purchasing managers’ index rose to 50.3 in March, signaling further expansion.
European economic data continues to improve
European equities followed the U.S. path for 1Q of 2024 as growth sectors rallied off the back of better economic data and improved corporate earnings. The purchasing managers’ index rose to 49.9 in March versus 49.2 in February as business activity normalised. Inflation remained under control as it fell to 2.6%, down from from 2.8% in January.
Similarly, annual inflation in the U.K. has trended down to 3.4% in February from its October 2022 peak of 11.1% and whilst the U.K. remains in technical recession in 2H of 2023, there are now signs of improved economic activity in 1Q of 2024.
Japan and China continue to contrast
Markets in Japan also continued their rally, as economic data improving (mild inflation and wage growth coupled with robust corporate earnings) pushing its major indices to record highs.
The Bank of Japan is overhauling its monetary policy measures, including lifting the negative interest rate policy, which has been well received by investors. The Bank of Japan set a short-term interest rate at 0.0% to 0.1%, a shift to a positive policy rate, rather than just zero and showing some growing confidence in macroeconomic conditions.
Despite a recent mini rally, Chinese markets remain relatively muted as investors take a careful view on the Chinese economy and property sector. This has not impacted Chinese equities but also Hong Kong markets.