01 May 2024
If you are covering the latest news in financial markets, please find below a comment from Lindsay James, investment strategist at Quilter Investors:
“Markets rounded off April with a whimper as weak consumer confidence data in the US, combined with some disappointing earnings reports, prompted a market pullback ahead of the Federal Reserve’s interest rate announcement later today.
“After strong global equity market performance in Q4 2023 and Q1 2024, a period over which the MSCI World gained 17.2%, investors have been questioning whether market fundamentals have kept up with rising valuations. With cracks appearing in US economic growth at the same time as inflation has looked more persistent, US equities have on aggregate struggled to make headway, despite strong earnings results from most of the ‘Magnificent Seven’ mega caps. Progress from here will depend on economic fundamentals with a requirement for either more muted inflation data, allowing for rate cuts, or better growth metrics, making them less necessary.
“Multi-asset investors can take comfort from better performance from UK equities, buoyed by miners and oil companies, even as the risk of losing Anglo American from the UK market grows following the recent bid by Sydney-listed BHP Billiton. This could however be the catalyst required to address deeper seated issues surrounding the competitiveness of the UK market, with Chancellor Jeremy Hunt yesterday making a rare intervention to warn that the FCA may be over-reaching in their threat to ‘name and shame’ corporates under investigation, in what could be important initial steps towards addressing broader corporate concerns about listing in London rather than elsewhere.
“The Nationwide house price index today showed slower growth in annual house prices in April, dropping 0.4% month on month, making the annual gain just 0.6% and below annual growth expectations of 1.2%. Rises in longer term interest rates through the course of 2024 have pushed mortgage rates up once again although they still remain around one percentage point below last year’s peak, translating into an ongoing headwind for both house prices and the UK economy as home owners must refinance at new, substantially higher, rates than they were formally enjoying. With around 60% of the mortgage market due to have refinanced at higher rates by the end of 2024, this is going to be an overhang on growth for some time yet. However with the UK economy diverging from the US with more convincing signs of disinflation, which are likely to build in coming months, supporting consumer confidence and the broader economic outlook, there is room for a degree of optimism that the picture may begin to slowly improve ahead of the election later in the year.”
