Investment Market update: May 2024

Discover how global stock markets reacted to persistent inflation around the globe during April and what it could mean for your investments.

5 min read

Inflation remained elevated in most major economies in April, leading markets to pare back expectations of imminent interest rate cuts. Equities struggled to deliver positive returns, with most experiencing a fall, and those that gained only achieved modest growth. Read on to learn more about what happened on the global stock markets in April and what it could mean for your investments.


US

Figures show that consumer spending was strong in March as the Personal Consumption Expenditures price index rose by 0.3% and costs for housing and utilities remained high1. This reassured investors after earlier figures had suggested a slowdown in economic growth alongside rising inflation, a combination that can lead to stagflation2.

The stubborn inflation figures led to a drop in value for US equities: across the month, the S&P 500 fell by 4.2%, the Nasdaq Composite fell by 4.4%, and the Dow Jones Industrial Average fell by 5%3.


UK

Economic output improved in the UK in April, as the flash composite Purchasing Managers’ Index (PMI) rose to 544. The flash composite PMI score is an average of the services and manufacturing sectors, so while services was measured at 54.9, manufacturing contracted, scoring 49.15. A measure below 50 indicates economic contraction, whereas 50 or above indicates growth.

Inflation fell from 3.4% in February to 3.2% in March6. The governor of the Bank of England said that the drop was in line with forecasts, but markets pared back expectations of an imminent interest rate cut, now expecting the first reduction in borrowing costs to come in September or November7.

The FTSE All-Share was one of the top-performing equity markets in the world in April, returning 2.5% for the month8.


Europe

After a recent downturn in economic activity for the eurozone, provisional figures suggest that output grew in April at the fastest rate in almost a year9. Though the economic growth is slow, at the equivalent of 0.1% for the quarter, other indicators are also positive, such as accelerating jobs’ growth and moderation of the downturn in manufacturing activity10.

Headline inflation remained flat at 2.4% year-on-year for April, the seventh consecutive month to see the rate remain below 3%11. This led markets to continue to anticipate an interest rate cut from the European Central Bank in June12.

European equities largely fell during April; the European Stoxx 600 fell by 1.49%, the first monthly drop since October 202313.


Asia

The Chinese government has pledged to support the economy with policies on interest rates and bank reserve requirement ratios14. The country has set a growth target of 5% for 2024, though economists have warned that more stimulus measures may be needed for this to be achievable15.

The Bank of Japan reduced its economic forecast for most regions at the beginning of April. But continuing wage increases offered some hope of a future interest rate hike after the central bank ended an extended period of negative interest rates last month16.

Hong Kong’s Hang Seng index grew by more than 7% in April and has rebounded by almost 20% from its lows in January17. The Japan TOPIX fell by 0.9% for the month while the MSCI Asia ex-Japan grew by a modest 1.3%18.


What this means for you

Though global inflation has broadly fallen from recent peaks, it remains stubbornly high in most major economies, posing a risk that interest rates may need to stay higher for longer. This economic uncertainty can sometimes affect stock markets, and you can see that many of the major global stock markets experienced losses across April, or only very modest gains19.

It’s important to remember that the economy is not the stock market. While markets can sometimes underperform when the economy is struggling, this isn’t always the case. So, basing your investment decisions on pared back economic forecasts may not be a sensible decision.

Instead, take a long-term view of your portfolio. Short-term fluctuations in value as a result of economic uncertainty or other global events are to be expected from time to time. If you can tune out the noise and follow the plan that you and your planner have created to weather these storms, you are more likely to see positive results for your investments than if you allow short-term panic to drive your decisions.


Please note: This guide is for general information only and does not constitute advice. The information is aimed at retail clients only.

The content of this guide was accurate at the time of writing. While information is considered to be true and correct at the date of publication, changes in circumstances, regulation, and legislation after the time of publication may affect the accuracy of the guide.


Sources:

1. 26.4.2024 US inflation increases moderately; consumer spending boosts Q2 outlook Reuters
2. 26.4.2024 US inflation increases moderately; consumer spending boosts Q2 outlook Reuters
3. 2.5.2024 Sell in May and go away? Think again CNN
4. 1.5.2024 TOP NEWS: UK manufacturing sector slips into decline in April AJ Bell
5. 1.5.2024 TOP NEWS: UK manufacturing sector slips into decline in April AJ Bell
6. 17.4.2024 Bank of England governor shrugs off smaller-than-expected fall in inflation The Guardian
7. 17.4.2024 Bank of England governor shrugs off smaller-than-expected fall in inflation The Guardian
8. 1.5.2024 Review of Markets over April 2024 J. P. Morgan
9. 23.4.2024 Eurozone flash PMI shows economy gaining recovery momentum in April S&P Global
10. 23.4.2024 Eurozone flash PMI shows economy gaining recovery momentum in April S&P Global
11. 30.4.2024 Eurozone inflation steady at 2.4%, keeping June rate cut in play as economy returns to growth CNBC
12. 30.4.2024 Eurozone inflation steady at 2.4%, keeping June rate cut in play as economy returns to growth CNBC
13. 30.4.2024 European stocks end April down 1.49%, posting first negative month since October CNBC
14. 30.4.2024 China to step up support for economy, flexibly use policy tools, Politburo says Reuters
15. 30.4.2024 China to step up support for economy, flexibly use policy tools, Politburo says Reuters
16. 4.4.2024 Bank of Japan offers bleaker view on economy, flags upbeat wage signs Reuters
17. 30.4.2024 Hong Kong stocks are back from the dead. Here’s why CNN
18. 1.5.2024 Review of Markets over April 2024 J. P. Morgan
19. 1.5.2024 Review of Markets over April 2024 J. P. Morgan


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