April 2024 Market Update

Working 9 till 5…

Craig McAvinue By Craig McAvinue – 1 May, 2024

“An investment in knowledge pays the best interest”

Stock and currency markets performance

After a very positive first quarter with gains in developed markets in each of the first three months, a slight correction with profit taking was inevitable. Though this wasn’t across the board with Emerging Markets and UK FTSE finishing the month up….

April 2024 Stock

Data table is from Google Finance

With the exception of a continuingly weakened Japanese Yen which saw a significant drop of over 4%, , the USD edged higher against other currencies…

April 2024 Currency

Data table is from Google Finance

Inflation vs. Employment Costs

I write this on Labour Day, the 1st May holiday also known as National Workers Day which is recognised in over 160 countries. With inflation having been brought under some control, the cost of labour remains a sticky point. Hopes of employment costs lowering did not materialise and the last quarter saw an increase of 1.2%.

This has been a reason for the Fed delaying interest rate cuts. Most feel September will be the earliest we see this happen. These rate movement expectations have been priced into the current market value.

High Employment rates (or low unemployment rates) can be a sign of a strong economy. In many developing countries this figure can be difficult to accurately assess as many operate outside of the system. Even in developed countries policy varies regarding state benefits so the stated rates of unemployment can be arbitrary.

However, looking at the UK, US and Germany, where the data holds some value, with the exception of some Covid spikes, most notably in the US, the rates of unemployment have remained remarkably steady over the last decade, at approximately 4%.

Inflation vs. Employment Costs

FTSE 100 Hits All-Time High

A notable exception in the monthly market performances was the FTSE100. The market was up during April. Hopes of a sooner interest rate cut and a weak pound (so company earnings overseas are reported higher) are factors in this. The FTSE sits at its all time high and breached the 8,000 mark during the last month.

In my February report I spoke of the S&P breaking new barriers by topping 5,000. Now the FTSE has reached its own milestone. However the two markets had a different path with the FTSE 100 breaching 7,000 seven and a half years ago, the S&P took just three years to go from 4,000 – 5,000.

This illustrates a rather underwhelming return on a FTSE 100 tracker with just 12.5% growth in over seven years. The Covid crash took a lot longer to recover from on the British side of the “pond”

Of course there are inherent differences in the types of company that make up the two indexes, the S&P benefitting from more accelerated growth largely due to tech.

FTSE 100

Diversification Beyond Stocks

The differences once again highlight the importance of having some diversification in your portfolio. This diversification should also extend to non stock market correlated assets. Real Estate, commodities, private equity, hedge funds are all examples of alternative investment opportunities which are less likely to be affected in the event of a global stock market shift.

Diversification Beyond Stocks

These can be quite sophisticated investments and you certainly need to do due diligence or be working with someone who can do it for you. April aside, with the bull market having had a good run of late, taking some money out and utilising some sound alternatives is a sound strategy for diversification.

This is not to say that there are not opportunities in the stock market right now, there will for sure be opportunities created with the recent falls and buying good companies at a fair price and following the Buffet mandate works. The old classic saying about not “having all your eggs in one basket” can be questioned by some professionals in the investment world, though it still holds some truth.

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