Monthly Commentary March 2024

Markets performed strongly in March, with many of the same trends seen in January and February continuing. This capped off a second-straight strong quarter for global equity markets which rallied consistently from the selloff in October 2023. The main difference from the final quarter of last year was that interest rates moved higher as the expected timing for interest rate cuts from key central banks, principally the US Federal Reserve, were pushed out to later in 2024. The Bloomberg Global Agg Index (NZD Hedged) returned 0.9% for March, and was very slightly down for Q1. By contrast the MSCI ACWI Index (NZD Hedged) was up 3.5% for March and 9.8% for the quarter.

The Kiwi was weak over the quarter versus most of the majors, so returns were even more impressive for unhedged investors, up 5.1% for the month and 14.5% for the quarter. Closer to home NZ and Australian equities also rallied strongly in March after a sluggish start to the year, with the NZX50 up 3.3% (+3.1% for Q1) and the ASX200 up 2.6% (+4.0% for Q1). The economic data releases over the first 3 months of 2024 generally surprised to the upside, with the US economy remaining a standout. So far, the impact of one of the fastest interest rate tightening cycles has not significantly slowed the broader economy, and US GDP expanded at an annualized rate of 3.4% in the fourth quarter of 2023. Economic growth in Europe was not as strong as in the US, but did exceed muted expectations, and the UK entered a phase of expansion. Information technology continued its leadership role from the final quarter of last year, with Communications Services not far behind. IT has been the best performing sector in four of the last five quarters, and IT and Communications are comfortably ahead of all others over the last twelve months due to the dominance of the mega-cap US names in these sectors. Other sectors that performed strongly over the first quarter were the more cyclical ones such as Industrials, Financials and Energy.  Japan (+20.6%) was the standout performer on a regional basis (local currency) with Europe (+12.4%) and the US (+10.2%) also delivering strong returns. The UK, Australia and NZ markets all posted positive returns for the quarter, but at 2.8%, 4.0% and 3.1% respectively, they lagged the broader global market.