March 2024 | Monthly update Omnis Managed Portfolio Service

Market-moving events      

US stock markets reach all-time highs. Strong company earnings results, particularly in the technology sector, and better-than-expected economic data propelled US equities to record highs in February. Solid manufacturing, labour and housing data helped to fuel investor confidence over the prospects of a soft landing, where recession is avoided.

UK equities shrug off recession. Data revealed the UK economy fell into recession in the final three months of 2023, after contracting for two successive quarters. The stock market was largely unmoved as it had already priced in the news. The Bank of England encouraged investors to focus on recent indicators, which show economic activity has picked up.

Japanese equities also reach record high. Japan’s return to steady growth and domestic corporate profitability continued to underpin investor confidence. Financial markets focused on when the central bank will end its negative interest rate policy. The Nikkei stock index hovered around its highest level in 34 years, continuing its run of strong returns from 2023.

Investment highlights

Equity and bond returns diverge. Global stock markets delivered strong returns in February, while bond values fell owing to faltering expectations on the timing of interest rate cuts. This divergence in performance is good news for multi-asset investors following a period where the diversification benefits between the two asset classes has been less clear.

Inflation and interest rates dominate. Markets are reconsidering the timing and pace of interest rate cuts even though major economies are likely to avoid recession. Central banks have been tempering expectations and investors are waiting to see how inflation trends over the next few months, which will determine the path of rates this year.

We remain cautiously positioned. We have an overweight allocation to bonds and slight underweight in equities. Although stock markets have rallied, a weaker economy could put pressure on company revenues. Our central case remains falling inflation, a peak in the interest rate cycle and a soft landing, but with a larger than normal risk of a deeper recession.

 

www.omnisinvestments.com Issued by Omnis Investments, which is authorised and regulated by the Financial Conduct Authority. Registered address: Auckland House, Lydiard Fields, Swindon SN5 8UB. This update reflects our view at the time of writing and is subject to change. The document is for informational purposes only and is not investment advice. We recommend you discuss any investment decisions with your financial adviser. Omnis Investments is unable to provide investment advice. Every effort is made to ensure the accuracy of the information but no assurance or warranties are given. Past performance should not be considered as a guide to future performance.