- April reinforced that inflation is the key risk to the market outlook and has the potential to unwind the rally in risk assets.
- April saw major stock and bond markets decline due to a shifting interest rate outlook, following US higher than expected inflation data, which fuelled fears that the US Fed and other central banks would not ease their monetary policy as soon as hoped.
- Over the month The US S&P 500 had a drop of -4.1%, the ASX 200 fell -2.9%, whilst the MSCI World ex-Australia Net Total Return Index returned -3.2% in AUD terms, whilst emerging market equities returned +1.0%.
- Large growth companies continue to drive a large portion of the US equity market’s results during the past three and five years – April was no different. The S&P 500 (weighted by the size of the companies in the index) has outperformed the equal-weighted S&P 500 (representing the results of the average company) by an increasingly wide margin over the past 18 to 24 months.
- Implied volatility, often viewed as the market’s fear index, has increased significantly for the ASX200, S&P 500 and Euro Stoxx 50.
- As of April 30th, investors were no longer pricing a cut to the US Fed Fund rate for 2024, leading major bond markets to 2024 lows of -1.70% in April, Bloomberg Barclays Aggregate Bond Hedged AUD ATR Index.
- Speculation about when the RBA will start to cut rates has shifted to talk in some quarters of further hikes, as inflation proves harder to bring down than expected.
- On April 24, the ABS reported that CPI rose 1% in the first three months of 2024, bringing annual headline inflation to 3.6%, outside the RBA’s 2-3% target range.
- The Australian unemployment rate rose by 0.1% to 3.8% and employment contracted by 7,000 jobs in March. Weaker domestic demand suggests that the unemployment rate should rise.
- House prices across Australia’s eight capital cities rose 0.6% m-o-m or 9.4% y-o-y in April. Auction clearance rates continue to rise, pointing towards underlying strength in the property market.
- The shift in interest rate sentiment was reflected in the sharp movement in currencies. The US dollar gained against other major currencies over the month causing issues for smaller economies say in emerging market sector, that may be forced to defend currencies. Up +005% against the Australian dollar over the month.
- Gold rallied to a new high of USD 2,300 per ounce during the month before falling back but still +11% y-t-d.