Political events
In April, heightened military confrontations between Israel and Iran significantly escalated tensions in the Middle East. These conflicts not only increased regional instability but also impacted global markets, particularly the oil sector, as concerns over potential supply disruptions grew.
Meanwhile, the G7 finance ministers convened in Italy to address pressing issues such as economic and energy security, migration, and fostering partnerships with Africa. The outcomes of this meeting are likely to influence broad economic policies among the world’s wealthiest nations, setting a strategic agenda for international economic collaboration and development.
Additionally, the International Monetary Fund (IMF) revised its global economic projections, holding steady its growth forecast at 3.2% for both 2024 and 2025. This forecast reflects a nuanced global economic landscape where advanced economies might see some acceleration, while emerging markets and developing economies could experience a slight slowdown, indicating a mixed pace of global economic recovery.
The situation on the markets
The Federal Reserve has opted to keep its interest rates unchanged, adopting a cautious stance as it anticipates potential rate cuts later in 2024. The European Central Bank and the Bank of England have also maintained their current rates, signaling that reductions might begin as early as June.
In the U.S., the economy shows signs of sustained recovery, with notable improvements in retail sales and industrial production. GDP projections continue to suggest growth rates above trends, indicating robust economic activity. In contrast, Europe presents a more varied economic picture, with differing performances across its regions.
Stock markets, which had previously been supported by the resilience of the U.S. economy and the expectation of falling interest rates, are now experiencing shifts in investor sentiment. Interest rate sensitivity has reemerged, particularly affecting small and medium-sized enterprises, companies with weaker balance sheets, and highly valued growth stocks, as the market adjusts to the evolving economic and financial outlook.
The impact on the asset classes equities and bonds
April was characterized by a downturn in stock markets across most regions, accompanied by a decline in bond prices, which were adversely affected by the increasing yields.
Equities
The S&P 500 saw a decline of 4.16%, a stark contrast to the previous month’s gain of 3.10% and markedly below the performance from the same month last year at 1.46%. This downward trend was echoed in the Eurozone and Switzerland, with reductions of 2.9% and 4.7% respectively. Conversely, the UK displayed a positive growth of 1.9%.
Bonds
In April, global government bonds experienced a decline of 1.5% in USD hedged terms. This movement in the bond market is a reflection of the ongoing adjustments in monetary policies and economic forecasts, which have influenced investor sentiment and driven interest towards traditionally safer asset classes.
What are the implications for the Everon portfolios?
The slight declines in the equity and bond markets also had an impact on the Everon portfolios. Compared to the international benchmarks, however, the various strategy lines held up well and recorded moderate corrections of minus 1.5-3.5%. We are continuing to maintain the broad diversification we have built up over the past few months.
