In April, the rally in equities came to an end. This was due to persistent inflation and a sharp slowdown in US GDP growth, which weighed heavily on market sentiment. Both headline and core US inflation, which is a measure of inflation that excludes volatile items such as food and energy prices, came in above expectations for the third consecutive month.

As a result of the higher-than-expected inflation, markets lowered their expectations for rate cuts even further. At a regional level, emerging markets outperformed both US and international developed markets due to encouraging economic data and investor interest in low-valued Chinese equities. Emerging markets refer to countries that are in the process of transitioning into developed market economies and they possess some, but not all, of the characteristics typically associated with developed markets.

International developed markets, such as the US and Japan, are countries with well-established economies and financial markets. In the fixed income market, negative returns were observed as yields increased (bond prices fall as yields rise).

Significant developments for April:

• US headline inflation exceeded expectations for the third month on the trot, reaching 3.5% y/y. In the UK, Eurozone, and Japan on the other hand, inflation decreased. In New Zealand, inflation decreased to 4.0% y/y but still remains one of the highest in the developed world with non-tradeables running at 5.8% y/y.
• Alphabet Inc., the parent company of Google, achieved a valuation exceeding $2 trillion in April after announcing their first-ever dividend and robust first-quarter earnings. With about 80% of total S&P 500 constituents having reported, the Q1 2024 earnings season has been rather positive thus far.
• Tensions in the Middle East heightened at the beginning of the month following a suspected Israeli airstrike, which hit the consular section of Iran’s embassy in Damascus. Iran retaliated in mid-April, launching a barrage of drones as well as cruise and ballistic missiles against Israel, which were mostly shot down.