After a mixed start to the year in January, we experienced a marked improvement in Global markets in February and March. With most of the activity in the US, Japan and the rest of Asia all showing strong gains. However, European stocks were muted, and the UK market continued to lag.
UK shares…
UK shares suffered in February, as data confirmed that the economy fell into a technical recession in the second half of 2023. However, the most recent data is suggesting that we have turned a corner in 2024. With a reduction in the maximum price that energy suppliers can charge for a unit of energy which should support falling headline inflation.
The consensus now is that headline inflation will fall to just below 2% and core inflation to around 2.6% by the end of 2024.
In the US…
In the US there is a different situation, despite the central banks best efforts to cool the US economy by keeping interest rates elevated, the economy remains resilient. With the full years economic growth forecast being revised up, which could mean there may not be a rate cut at all in 2024. The Federal Reserve at the March meeting left its main interest target unchanged in a range of 5.25%-5.5%. US shares led the market in the first quarter, aided in part by strong momentum trades and the fact that the outperforming Magnificent Seven are all based in the country.
Looking Ahead
After a troubled couple of years, with the UK economy falling into a technical recession, the economic picture is now slowly improving. With unemployment and growth broadly pointing to a “Soft Landing”, meaning that economies could emerge from a high inflation period with just a shallow recession.
UK Equities have seen ownership decline, but there is a growing perception that a change in the UK economic environment could bring about a reversal of fortune. A raft of economic data is showing that things are turning around, with inflation falling, robust wage growth and tax cuts. all feeding through to higher levels of consumer confidence. The feeling now seems to be that we will see interest rate cuts later this year as inflation falls to around the target level of 2%. UK shares are still considered cheap compared to other markets at the current time, but that could change.
If you would like to discuss your current investments or future plans we would be happy to schedule a call – Contact details for the CFM team are here and my contact details are:
E: stephen.lovelock@capitalfinancialmarkets.co.uk
T: 0203 6970561.
Stephen Lovelock, April 2024
All articles on this website are for information only and should not be seen as advice or a recommendation to take action. Please note that investments go down as well as up, you might not get back the original capital invested. Past performance is not a guide to any future.