Quarterly Investment Review: Q1 2024

April 10, 2024
Quarterly Investment Reviews

Welcome to the Quarterly Investment Review for Q1 2024.

Our Investment team have put together a range of resources to update you on what has happened in themarkets across the first quarter of 2024. Here you will find: 

  • High-level, global equity performance analysis
  • Videos from our team of investment experts
  • A written summary covering the quarter's main market events

Global Equity Performance Analysis:

The graph below shows global equity performance across the quarter and plots world events along the performance line to indicate their impact on markets.

Hear from our team:

The AI Mega-trend: What you need to know

Portfolio Manager, Sean Mills, answers four key questions on the current AI mega-trend.

Investing in China

Head of Equity, James Penn chats to Portfolio Manager, Matthew Seaward about China's current investment landscape.

Podcast: Capital Alchemy

A new episode of Capital Alchemy has recently been released. Join host Tatenda Chikombero as he chats to Ulrik about the current tax landscape in South Africa including:

  • The key issues in South Africa’s tax system
  • Local trusts with offshore beneficiaries
  • Offshore trusts with local beneficiaries
  • Golden visas and tax emigration
  • The potential introduction of a wealth tax
  • Offshore jurisdictions

Watch the full podcast here on YouTube.

Listen to the podcast on your preferred listening platform.

Summary & Outlook - Q1 2024:

Developed markets started the year mutedly, but by the end of January US, European, and Japanese equity markets had raced ahead delivering record highs across multiple trading sessions. Chinese markets were closely watched given negative performance in both mainland China and Hong Kong. Indices reinforced the view that the second largest economy in the world was struggling to return to levels of pre-pandemic growth.

In the end, the first quarter of 2024 produced the best first quarter in total equity market returns seen in almost 5 years. NIKKEI was the best index achieving 20.6%, followed by EUROSTOXX 12.4%, S&P 10.2%, and NASDAQ 9.1%, all in local currency terms, while the main UK index returned a modest 2.8%. The Japanese market index hit an all-time high after decades of stagnation, largely due to corporate reforms that took place during 2023 and a cheap yen attracting foreign buyers on a large scale. US stocks continued to benefit from AI euphoria as an endless stream of positive news on generative AI progress helped push US stock markets to all-time highs. The US Q4 earnings season also delivered strong results, with 75% of companies beating analyst expectations. However, there were some surprising individual underperformers, especially mega cap names like Apple and Tesla, which experienced difficulties amidst competition concerns or in dealing with regulatory lawsuits imposed by US and EU regulators. European stocks were surprisingly ahead of US peers for the quarter.

Fixed income markets came under pressure after the commencement of interest rate cuts were rolled further back in 2024, while the number of cuts expected for the full year have also been reduced. Global government bonds yields had a bumpy ride, mainly caused by bond markets overreacting to any uncertainty around inflation data that challenged the disinflation narrative while also navigating global central bank rhetoric which swung between dovish and hawkish projections. The Bank of Japan finally exited its yield control mechanisms and a negative interest rate territory while the Swiss National bank was the first major bank to cut their base rate by 25 basis points.

How the market digests inflation data and the resulting central bank responses continued to be at the forefront of macroeconomic focus. At the end of the quarter major developed market inflation rates for the US, EU, and UK were 3.2%, 2.4%, and 3.4% respectively. Reduced expectations of lower interest rates have mainly been affected by the surprising resilience of the US economy, with inflationary pressures not dissipating at a sufficient level to warrant cutting. Some signs of weakness have been seen, with European, UK, and Chinese economic growth flat, and even a technical recession for Germany. This could warrant the possibility of the EU or UK cutting rates before the US.

In commodity markets, gold recorded significant gains as it finished the quarter up 8.1% at $2229. The gold rally was supported by a softening dollar, the outbreak of two major conflicts, and pushed back projections of rate cuts making gold more attractive.  Oil also rallied 13.5% finishing the quarter at $87. Oil prices were impacted by the Israel-Palestinian war, disruptions to Red Sea passage shipping, and reduced output from Russia caused by significant disruptions to refineries which were targeted by drone strikes.

This quarter presented a series of opportunities across a range of sectors. Markets largely benefited from a strong macroeconomic backdrop and the positive sentiment that surrounds the generative AI megatrend. We believe there remains a supportive central bank environment and we anticipate the first rate cuts will now begin in June, possibly with the European Union or the United Kingdom leading the way over the United States. We continue to maintain a diversified asset approach in line with our aim of achieving long-term performance targets while also being mindful of any short-term opportunities as they present themselves.

Disclaimer: The views, thoughts and opinions expressed within the article / video are those of the author / speaker(s) and not those of any company within the Capital International Group (CIG) and as such are neither given nor endorsed by CIG. Information in this article does not constitute investment advice or an offer or an invitation by or on behalf of any company within the Capital International Group of companies to buy or sell any product or security or to make a bank deposit. Any reference to past performance is not necessarily a guide to the future. The value of investments may go down as well as up and may be adversely affected by currency fluctuations. CIG, its clients and officers may have a position in, or engage in transactions in any of the investments mentioned. Opinions constitute views as at the date of publication and are subject to change.

Regulated investment activities are carried out on behalf of Capital International Group by its licensed member companies. Capital International Limited and Capital Financial Markets Limited are licensed by the Isle of Man Financial Services Authority. Capital International Limited is a member of the London Stock Exchange. CILSA Investments (Pty) Ltd (FSP No. 44894), trading as Capital International SA, is licensed by the Financial Sector Conduct Authority in South Africa. All subsidiary companies across both jurisdictions are represented under the Capital International Group brand.

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