Monthly Commentary April 2024

Global equity markets finally took a few steps backwards over April after a run of exceptionally strong performance since mid-October last year. Equities and bonds were both weak over the month. The MSCI ACWI (NZD Hedged) was down 2.7% with most developed markets weak. China and Hong Kong equities bucked the trend and continued to recover, outperforming most other markets after disappointing results over 2023.

Global bonds were flat over the first quarter, but fell over April as yields moved higher on expectations central banks will not cut rates as aggressively as markets had priced in at the end of 2023. The Bloomberg Global Agg Index (NZD Hedged) was down 1.6% for April.  In equities, the MSCI ACWI Index (NZD unhedged) was down 2.1% for April. The Kiwi dollar fell just below U$0.59 over the month which provided a slight cushion to unhedged investors.

On the economic front, the US economy posted a first quarter GDP print that was weaker than expected, following two very strong quarters to end 2023. This coupled with another inflation print higher than the Federal Reserve would like meant expectations for the first interest rate cut was pushed out further which accounted for some of the weakness in equity markets. With the overall markets weak over April, it was the more defensive sectors that outperformed the broader market. Utilities was one of the few sectors to post a positive return, and consumer staples also did relatively well. Energy also posted small gains despite oil prices falling slightly over the month. Previous sector leaders such as information technology (-5.6%) was one of the laggards over April, while real estate was the weakest sector, falling nearly 7%. On a regional basis (all returns in local currency) Hong Kong was the best performer, up 7.4%, and emerging markets in aggregate posted a positive return (+1.4% in USD terms). The UK share market was one of the few developed markets to post a positive return, up 2.4%. Japan is still the strongest regional market on a year-to-date basis, but it lagged all others and the Nikkei 225 Index fell 4.9% over April. The NZ market lived up to its reputation as a defensive market falling only 1.2%, outperforming Australia where the ASX200 was down 2.9%.