Investors enjoyed further strength in equity markets for the first quarter of 2024, up 8%. Global equites have rallied around 20% for the past six months, with the ‘mega-tech’ stocks the driving force of performance. Towards the end of the quarter, energy and financial stocks joined the rally. The tech returns turning divergent of late with disappointing news from both Apple and Tesla, seeing these giants faulter, down 12% and 29% respectively. The market favourite, Nvidia (up 80% this quarter) continued to contribute meaningfully to the positive sentiment of the markets. Market volatility is on the rise. Emerging markets continue to lag with especially weak returns from China, down 2%, as slower growth and geopolitical risks remain a concern.
Rates in general remain on hold as inflation rates moderate slowly and expectations for rate cuts are pushed out towards the end of the year. The geopolitical environment is elevated, evident in particular in higher oil prices. For an election year in so many countries, politics may also impact on sentiment in the short-term. Cash and bond yields are attractive and will be competing for a place in portfolios that were previously equity heavy, especially as equity valuations are creeping up.
The fundamentals for South Africa remain poor and was evident in both the equity (down 2%) and bond markets (down 2%) this quarter. While our asset classes are attractively priced, reflecting investor uncertainty, domestic growth is weak. We anticipate rates to remain steady until inflation levels out later this year, The outcome of the local election is contributing to uncertainty and may also be influencing investor sentiment.
The table below highlights the performance
of selected markets and asset classes to 31 March 2024
Source: MSCI, Datastream, Bloomberg, Visio and Factset
During periods of considerable uncertainties, economic and geopolitical, it is vital to remain patient and assess the opportunities as they present themselves. An investment objective to provide inflation beating returns over time remains more crucial than ever. Diversification across asset classes will be key. It is essential to focus on your unique investment horizon and financial requirements to optimise your portfolio accordingly.
We welcome any feedback or questions
Kind regards
The BAYMONT Wealth team
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