Political events
March saw a rise in commodity prices, with oil approaching a 5% rise to $87 per barrel for Brent crude. This surge was partly driven by continued Houthi attacks on shipping in the Red Sea, prompting oil tankers to navigate the longer route around Africa. Such detours not only maintained high levels of oil in transit but also contributed to a tighter Atlantic Basin market, pushing crude oil’s forward pricing structure into deeper backwardation.
On the monetary policy front, central banks hinted at potential rate cuts, with the Swiss National Bank leading by reducing interest rates by 25 basis points to 1.50%, marking a shift among developed-market central banks towards easing monetary policies. Similarly, the Bank of Japan made a pivotal move by ending its eight-year practice of negative interest rates, responding to clear signs of robust wage growth within the country.
The situation on the markets
The US economy demonstrated resilience, with notable improvements in retail sales and industrial production. Early estimates for the first-quarter GDP showed growth exceeding usual rates, although inflation presented a mixed picture – slight increases in overall levels were observed, yet the core inflation, which excludes volatile food and energy prices, continued on a downward trajectory.
Europe’s economic performance was more restrained, marked by mixed signals from manufacturing and service sectors. Conversely, the UK showed more positive economic indicators, evidenced by slight GDP growth and a consistently strong Composite PMI during the first quarter.
The forecast for global consumer price inflation in 2024 was modestly adjusted upwards, still indicating a decline from the previous year’s levels. This adjustment reflects a gradual and uneven process of disinflation, suggesting that while inflation pressures are easing, the pace and extent of this decline vary across regions and sectors.
The impact on the asset classes equities and bonds
March witnessed a continuation of the positive trend in global equities, with a notable 3.1% increase in USD terms. This consistent upward movement highlights the widespread optimism among investors, spanning various sectors and geographical regions. Meanwhile, government bonds saw a rise as well, albeit at a more modest rate of 0.7% in USD hedged terms, reflecting an overall confidence in the market.
Equities
Major global stock indexes experienced upward trends, showcasing widespread investor enthusiasm and engagement across markets. The MSCI All Country World Index, a comprehensive gauge of global equity performance, rose by 3.1%, indicating a persistent upward trend across different regions. In the US, stocks also enjoyed a 3.1% increase, while European markets, particularly the Eurozone and the UK, outperformed with rises of 4.2% and 4.5% respectively. This pattern underscores the positive sentiment permeating through global equity markets, driven by various sectors and geographical areas.
Bonds
The bond market demonstrated mixed results, with distinct factors influencing the outcomes for government and corporate bonds. Government bonds, in particular, experienced a positive shift, registering a 0.7% gain in USD hedged terms, indicating an overall increase in their performance. This upward movement in government bonds was coupled with a decrease in longer-term government bond yields over the month, reflecting a complex interplay of factors including central bank policy expectations, inflation trends, and economic outlooks.
What are the implications for the Everon portfolios?
The upward trend in equities also ensured a consistently positive performance in the Everon portfolios of all strategy styles in March – these gained between 2 and 5% depending on the regional focus and strategy style. We responded to the trend in bonds with a slight reduction in the strategic asset allocation in favour of real estate.
