Market update – Quarter ending 31 March 2024

Global equities have experienced a strong start to 2024, with resilient economic data and relatively strong earnings reports helping the S&P 500 surpass the 5000 mark for the first time. Within equities, developed markets have outperformed emerging markets. The UK and Eurozone have both underperformed international developed market equities, while the Japanese Nikkei 225 index reached a new all-time high for the first time in over 30 years. US equities continue to go from strength to strength as the artificial intelligence narrative and economic strength in the US offset the anticipation of a slower projected path of rate cuts. Closer to home, New Zealand equities have lagged international counterparts after disappointing earnings and interest rate uncertainty weighed on market sentiment. The MSCI World Index is up 9.6% for the calendar year-to-date.

In fixed income, government bonds have been negative as developed market yields have generally increased across the curve. Within credit, high yield has outperformed investment grade debt. Credit spreads for both remain near 52-week lows. The Bloomberg Global Aggregate Index (NZD Hedged) has returned -0.9% in the calendar year-to-date, while the Bloomberg Global Aggregate Corporate Index (NZD Hedged) has returned -1.6%.

March saw global equities extend their recent gains with the MSCI World Index up 3.4% (local currency) for the month, despite an increase in US inflation for the second month in a row. US equities were supported by the US Federal Reserve, which reaffirmed its projection of three rate cuts in 2024. The prospect of rate cuts from global central banks was also positive for global bond markets, helping the Bloomberg Global Aggregate Index to return 0.9% for the month. New Zealand equities bounced back after a slow start to the year, with the S&P/NZX50 Index up 3.3% in March despite news of a technical recession. The local bond market performed strongly over March returning 1.1%, with bond yields easing after the Reserve Bank kept the Official Cash Rate on hold at the end of February.