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April 2024 market review: International
During April 2024 US growth slowed but remained strong, while core inflation accelerated above expectations.
Global market performance in April:
Risk assets sold off due to inflation remaining sticky and growth (sustainability) concerns, while safe-haven assets (Gold +3.3% and Dollar Index +1.6 %) outperformed. US and Japanese equities led global markets lower after a strong first quarter. US fixed income also declined on expectations of a delayed rate cutting cycle.
Industrial metals rallied on the back of global manufacturing recovery, notably Zinc (+22.3%), Tin (+16.8%) and Nickel (+14.8%). Most global refined copper demand came from China, with copper increasing (14.3%) for the month. We remain cautious on the Chinese economy given growth headwinds and the large oversupply of property developments, both finished and unfinished.
US economic outlook and Fed policy:
US growth slowed but remained strong, while core inflation accelerated above expectations. The Fed signalled patience and optimism and suggested that the next move would likely be a rate cut, not a hike. Fed Chair Powell maintained his view that the Fed’s policy stance is restrictive and that labour markets are moving toward better balance. He outlined three scenarios: a path where inflation remains persistent, and they “hold off on rate cuts;” a path where they regain confidence that inflation is coming down and they cut, and a path of unexpected weakening in the labour market that prompts cuts.
SARB policy implications:
The SARB is expected to monitor US inflation and Fed policy closely, as this could affect the domestic inflation outlook. The SARB still has scope to cut rates by 50-100bps from 3Q24, as global rate cuts gain momentum with the potential for the rand to appreciate after the May election.
As always, we remain committed to providing you with the best possible investment outcomes while remaining true to our long term, well considered approach and making sure that portfolios are positioned appropriately for a variety of likely outcomes.
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