Changing Landscape

In April 2024, the global equity market experienced significant shifts compared to March. The release of US inflation data played a crucial role in this transformation. The US inflation rate surged to 3.5% yoy, surpassing both the previous rate of 3.2% yoy and the market consensus of 3.4% yoy. This inflationary pressure was driven by a robust job market, highlighting the strength of the US economy. As a result of these data, expectations regarding Federal Reserve rate cuts for the year had to be recalibrated. Initially anticipated for mid-year, the rate cut is now expected to occur later, pending further confirmation from the Fed that the elevated rate needs adjustment.

Geopolitical tensions in the Middle East further impacted the market. The escalating conflict between Israel and Iran led to anxiety, particularly as commodity prices, including oil, approached USD90 per barrel. Investors feared a resurgence of inflation, prompting speculation that the Fed might adopt a hawkish stance. However, despite ongoing geopolitical risks, the escalation eventually subsided.

The positive first-quarter results from major US companies served as evidence of a robust economy. Our recommendation to investors is to remain invested despite market volatility. We anticipate a sideways market until US economic data weakens and The Fed provides clarity on its monetary policy pivot.