Political events
Taiwan’s elections and the conflicts in Ukraine and the Middle East were central political events influencing market sentiments. The outcomes of Taiwan’s elections, with the Taiwan People’s Party (TPP) capturing a significant portion of the legislative seats, have set the stage for potential shifts in domestic and international policies. Concurrently, the ongoing conflicts in Ukraine and the Middle East, marked by military engagements and geopolitical tensions, continued to test the resilience of global markets and international relations.
The situation on the markets
The global economy showed signs of moderating inflation and steady growth, paving the way for a potential soft landing. According to the World Economic Outlook Update by the IMF, global growth was projected at 3.1% for 2024, a slight increase from previous forecasts, buoyed by resilience in the United States and several large emerging markets, alongside fiscal support in China. However, this growth rate remains below the historical average, with high central bank policy rates, fiscal support withdrawal, and low productivity growth as constraining factors. Notably, global headline inflation was expected to decline, with a forecast of 5.8% in 2024, indicating an easing of inflationary pressures.
The impact on the asset classes equities and bonds
The financial markets, particularly equities and bonds, responded to the evolving economic landscape shaped by political events, fiscal policies, and global economic conditions. The interplay of these factors resulted in distinct trends and performances in both asset classes.
Equities
The equity markets in January reflected a cautious optimism among investors. The performance of mega-cap stocks was a focal point of discussion, highlighting their significant influence on overall market trends. These companies, having demonstrated resilience and profitability, continued to attract investor interest, despite concerns over valuation levels. The Dow Jones Industrial Average rose 1.3%, while the S&P 500 and the NASDAQ added 1.7% and 1% respectively. The equities market’s positive trajectory was supported by a stable interest rate environment and a moderating inflation outlook, which bolstered investor confidence in risk assets.
Bonds
The beginning of the year saw a steady performance in Treasury yields, with minor increases observed in longer-term Treasury bonds. Specifically, the 30-year Treasury bond increased by 19 basis points to reach 4.22%. In contrast, the shorter-term Treasury Bills, including the 1-month, 6-month, and 1-year durations, saw decreases by a few basis points.
What are the implications for the Everon portfolios?
The fundamentally positive developments were also reflected in the Everon portfolios in January. Our global strategies (multifactor, income and sustainability) all posted gains of between 2% and 3% in the equity segment. It is worth mentioning that the Swiss franc weakened somewhat, particularly against the US dollar, which meant that performance in the global portfolios also benefited from foreign currency effects. In the multifactor and income strategies, we are maintaining the relatively high degree of diversification of individual securities that we have built up over the past year at the beginning of this year.
