Market Update with Aled Phillips

March saw stocks continuing to perform well, finishing up 3% and year to date 9.5%. Bond markets however, struggled somewhat, generating a small gain of 0.9% – but YTD down 0.1%. The other major asset class that performed well over March was commodities, up 4.4% and YTD 8.7%, with Gold being a standout performer with gains of over 9%. In currency markets, the dollar was flat, rallying by less than 1% against sterling YTD. One of the biggest moves has been seen in Yen which continues to weaken and is now down 6% YTD against sterling.

Regionally in equity markets, the UK was the strongest performer, up 4.7%, followed by Europe at 3.8% and then the US at 3.2%. Emerging Markets continue to struggle to keep up with the developed market optimism, gaining 2.5% in March. The March regional returns bucked the trend of the year so far, with Japan being the strongest equity region up 12%, closely followed by the US – up 11%.  

The market cap positioning regionally was more mixed with small cap (smaller companies) outperforming in the UK and Pacific ex Japan, whilst midcap (mid-size companies) outperformed in US, Europe and Japan. So far this year, large cap (larger listed stocks such as those listed on FTSE 100) has outperformed in all regions apart from in Japan where midcap continues to outperform.

In the bond market, Emerging Market debt and High Yield had another strong month and have been the best performers YTD. Government and Corporate bonds produced marginal gains in March but continue to remain generally flat so far this year.

Key market drivers

Interest rate expectations

Markets continue to focus on the easing cycle.  US Federal Reserve Chairman, Jerome Powell, produced a dovish tone in his press conference on March 20. Here he focused on growth rather than inflation, believing that rates are sufficiently restrictive for inflation to move back to 2% without further actions. How many cuts will be forthcoming in 2024 remains up for debate. In the UK and Europe, a similar message persists with the first cuts expected at the end of Q2.

The big news on interest rates came from Japan which moved away from its easing policy after decades of deflation and moved towards a pace of gradual policy normalisation. Wage inflation in Japan will be keenly watched and this might end its Negative Interest Rate Policy (NIRP) earlier then expected. 


Despite Powell’s rhetoric for now, US inflation is remaining sticky. Headline inflation rose marginally in March YOY to 3.2% from 3.1% in the US. More pronounced falls were seen in the UK, where headline inflation fell from 4% to 3.4% and in the Eurozone, inflation declined from 2.8% to 2.6%. It should be noted though that both UK and Europe have slower growth then the US.

Artificial Intelligence (AI) catalyst  

The semiconductor index gained 17.5% during the quarter, led by an 82% return for NVIDIA with March continuing to fuel the rally as it coincided with multi specific AI events and analyst days. Fears of a bubble persist but as we know, the timing of bubbles is notoriously difficult. JP Morgan Chief Executive Officer, Jamie Dimon, was recently quoted saying that this move in AI should not be compared to the tech bubble in the early 2000s as AI is here to stay and valuations of some key companies like NVIDIA are based on outstanding earnings reports.

In summary 

Overall, it’s been another positive month and a continuation of a positive trend for portfolios. As there was much doom and gloom being touted last year, this again emphasises the importance of staying invested and to holding on to assets. There were many people who were concerned last year and came out of markets due to cash rates being relatively high. I'm pleased to say that this was not the case for any of our clients, as any that would have done so would have lost out significantly with balanced portfolios returning circa 10% and aggressive circa 12% over the last 12 months. 

It's important to think long term for your investments and not be tempted to switch assets short term, as we very seldom know when these good times will arise. Even economic forecasters are just taking an educated guess, highlighted by Warren Buffet in his recent annual shareholder meeting where he stated, "if they did know what was going to happen, it would be like finding a treasure map and handing to the neighbours."

As ever, should you have any queries about your portfolio or financial plan please don't hesitate to contact your adviser.

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The contents of this article do not constitute financial advice in any way; if you have any concerns about your finances you should talk to your financial adviser. The value of your investments can go down as well as up.

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Market Update with Aled Phillips
Aled Phillips 8 April 2024
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