World Market Update April 2024

The economic outlook and world market update for April 2024 show a favourable economic background of inflation cooling (albeit slowly) and the prospect of lower interest rates.

The Economic Outlook and World Market Update April 2024  also showed stock markets recorded their best first-quarter performance in five years.  

US Markets

Investor confidence grew that the US would achieve the elusive ‘soft landing’ as economic data, especially the jobs market, has remained robust even after the Fed’s rate tightening cycle.  

The American market has delivered consistent gains over the quarter, closing at a record high on 22 separate occasions. 

While interest rate expectations have been disappointing, on a more positive note, US equities are still forecast to deliver earnings growth of around 10% in 2024, so there remains a relatively benign background to equity markets. 

Not only did other parts of the US market start to perform, but the rally broadened globally with, for example, the FTSE 100 in the UK and market indices in Germany, France, and Spain all outperforming the S&P 500 in that month.  

In the US, the so-called Magnificent Seven was not so magnificent in 2024, a point not picked up by many investors. Tesla has seen its share price decline over the past 12 months, with the stock coming under pressure from last summer driven by earnings downgrades.  

Apple, too, is one of the so-called Magnificent Seven and has only been up a negligible amount in the past 12 months compared to the S&P 500’s gain of over 25%. It has also seen downgrades to earnings expectations.  

Nvidia, Meta, and Amazon have been the top performers among these names, and their earnings forecasts have all been upgraded.  

Investor sentiment in European markets

Economic Outlook and World Market Update April 2024 showed markets have seen investor sentiment improve despite relatively muted short-term forecasts for earnings gains of roughly 4% in 2024. 

This is driven by a belief that the worst is now behind the region, with the Continent switching from reliance on Russian energy sources to liquid LNG, and recessionary fears for the region overall having disappeared.  

In other parts of the developed world, Europe has shown signs of shrugging off the worst of the cost-of-living crisis. Consumers were hard hit in 2022 and again last year by higher global energy prices, which saw consumer confidence drop as household spending power came under pressure.  

Europe has now seen two relatively mild winters in succession, with gas prices falling quickly. This has reduced headline inflation numbers, helping disposable income.

The labour market in Europe remains relatively strong, and wages are now growing in real terms. 

A positive outlook in Japan

At the local currency level, Japan was the best performer over the quarter. In yen terms, the Topix rose by over 16%, although currency weakness reduced many of these gains for non-domestic investors.  

Equities in Japan were encouraged by the wage growth data in the final part of the quarter. There was a 3.5% increase in 2023, the largest in the past 30 years, and a very positive outlook for wages in fiscal year 2024, with many companies now promising wage increases.  

Economic Outlook and World Market Update April 2024 view of risky assets

The 60% rally in bitcoin perhaps demonstrates the extent of ‘risk on’ appetite, the total value of which is now above the gross domestic product of about 150 countries.  

All in all, the quarter was a positive one for risk assets. In recent periods, markets have moved earlier to discount the prospect of lower rates and a new economic cycle. The post-pandemic period shows investors will ‘front run’ the prospects of any economic rebound.  

UK & Property Market

Economic outlook and world market update April 2024 show signs that the UK is past the worst of its economic difficulties, although uncertainty will remain until the election outcome is known.  

Overall, the global economy looks likely to avoid recession in 2024, which is providing a supportive backdrop for corporate earnings.  

Inflation has been slower to moderate than optimists hoped, but markets have been able to look forward and anticipate future rate cuts, which provided a supportive backdrop during Q1.  

Nationwide, the UK’s largest building society reported a drop in house prices in April.  Read more here

Prices fell 0.4% compared to March, bringing the average home value down to £261,962 – 4% lower than the peak in summer 2022. 

The key culprit?

Rising borrowing costs. Lenders’ recent wave of mortgage rate hikes reflects expectations of a slower pace of interest rate cuts by the Bank of England.  

The Halifax became the latest lender to join the trend, announcing a 0.2 percentage point increase across a significant portion of their mortgage options. 

While fixed-rate mortgages offer stable rates for a set period (typically 2-5 years), borrowers face a significant jump when it’s time to renew.  

With roughly 1.6 million existing fixed-rate deals expiring this year, experts like Mark Harris (CEO of SPF Private Clients) warn that the era of ultra-low interest rates is over and that borrowers should prepare for higher mortgage costs in the long run. 

Read what to do if your mortgage product is expiring

Inflationary move in the Economic Outlook and World Market Update April 2024

The Economic Outlook and world market update for April 2024 shows that rates and rate expectations have always been essential drivers of short-term moves in equity markets.  

Although inflation rates in the US and other developed economies have fallen during the first quarter, the decline in core inflation numbers has been slower than expected.  

Inflation rates in Europe

Inflation data in Europe has been more benign than in the US.

In March, German inflation fell more than forecast, with consumer prices rising 2.3% over the past 12 months. European countries have benefitted from falling energy and food costs and slower goods inflation.

The German economy needs to catch up to southern European states such as Spain, Italy, Portugal, and Greece, which rely more on manufacturing than tourism. 

France, Italy, and Spain have also recorded lower-than-expected inflation rates, which gives the ECB scope to start cutting rates ahead of the US. This possibility is reflected in the weaker Euro versus the US currency.

The ECB are unlikely to move ahead of June and will continue to monitor wage pressures, which have shown some signs of abating.