In March, investors who remained optimistic were rewarded as stock markets continued to rise despite an increase in US inflation for the second consecutive month and a slowdown in consumer spending. The US Federal Reserve (Fed) supported US equities by reaffirming their projection to cut interest rates three times in 2024. Fed Chair Jerome Powell expressed concern about the risks of delaying rate cuts and indicated a preference for lowering rates instead of raising them, despite the recent increase in inflation. Japanese stocks also performed well, increasing by 4.2% in local currency terms, as Japan's era of negative interest rates and yield curve control policies came to an end.

In terms of global markets, developed markets performed better than emerging markets in March. The MSCI World Index returned 3.4%, while the MSCI Emerging Markets Index increased by 3.0% (both in local currency terms). Unlike previous months, value stocks outperformed growth stocks as the overall performance of equities expanded beyond just technology stocks. Value stocks increased by 6.6%, while growth stocks rose by 3.7% (both in unhedged NZD).

New Zealand equities bounced back after a slow start to the year, with the S&P/NZX 50 up 3.3% in March. This came despite news of a recession, as well as ANZ’s business confidence measure showing a drop in confidence for February. Across the Tasman, the S&P/ASX 200 was also up 3.3% (in AUD), continuing the strong performance seen over the last year.

NZ Bonds performed strongly over March as growing expectations of rate cuts put downward pressure on bond yields. Reserve Bank of New Zealand Governor, Adrian Orr, stated that rate cuts were getting closer, though he felt they were not yet on top of inflation. NZ 10-year government bond yields fell 18 basis points to 4.59% by the end of March, and the Bloomberg NZ Bond Composite 0+ Yr Index had increased by 1.1%.

Key events in March included:

• Former US President Donald Trump moved closer to a potential rematch with President Biden in the 2024 election by securing the Republican nomination. This followed a Supreme Court ruling that states cannot disqualify candidates from running, overturning Colorado's previous disqualification of the former President due to his involvement in the January 6th Capitol attacks.
• New Zealand experienced its second "technical" recession in 18 months, as economic data for Q4 2023 released in March showed a 0.1% contraction in GDP.
• After eight years, the Bank of Japan (BOJ) abandoned its negative interest rates policy and raised rates from -0.1% to 0.1%, signalling a departure from its previous ultra-loose monetary stance. This represents a significant shift in the BOJ's approach to combating deflation.