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RiverPeak Wealth Monthly Update For April 2024

Global Market Overview – April 2024


We often say that the future can’t be predicted, and the last few weeks have shown why.


Weaker-than-expected US retail sales data in April has led investors to reconsider their confidence in how robust the economy is.

 

In the earlier months, the US economy exhibited higher-than-expected inflation data, but April’s weaker data, coupled with policymakers’ hawkish statements, posed a challenge for the optimists.


This uncertainty rippled across global markets, leading to declines in many of the largest indices beyond the US, including the FTSE 100 and Europe’s Stoxx 600. The recovery has been swifter for these indices compared with the S&P 500 as the largest stocks in the US underperformed the global equities.


When it comes to individual stocks, the narrative is still quite concentrated on the seven technology names. The only caveat is that, while there are gains across the board, Meta’s warning of slower growth and Tesla’s latest earnings announcements have hurt investor sentiment.

 

So, monetary policy appears to be driving equities, indirectly, at the moment. The more direct impact is on the bond markets. A US Treasury sell-off came alongside an upturn in European bonds, highlighting the economic divergence between the two. The two-year US Treasury yield went up to around 5%, its highest value of the past five months.


There is little reason to believe the market is on a downward trajectory, but April was a reminder that one can never be too certain about what will happen.


If the future is unpredictable, the best way to grow is to prepare for different scenarios – and our long-term views do precisely that, as we explain below in our core views. Leaning on the principle of diversification, our portfolios are ready to grow in every kind of environment.


Core Views


Over the next twelve months, we think that the global economy will slow down - prompting bouts of volatility. In this environment, it is important to rely on a stable identity. Economic uncertainty creates fear and investor sentiment tends to overreact to economic turning points. Going forward, we believe that:


Inflation is coming down: Across the developed world, inflation has peaked, and is mostly falling. Supply-chain disruptions have eased, energy prices are a little more settled, and companies are no longer reporting issues with finding workers. Of course, slower inflation still means rising prices –so the cost of living pain isn’t going away quickly.


Interest rates are high: We’re now over a year into the rate hiking cycle. Interest rates are unambiguously high when compared with the past decade. The impact of higher rates is always the same – although time-to-effect changes in every cycle.


The economy is slowing: For consumers and companies, day-to-day life is getting harder – whether it’s rising costs or increased debt, there’s less money left at the end of the week or month. As the flow of money around the economy slows, strong growth is more difficult to achieve. The world may or may not slip into a ‘technical’ recession in the next three months, but a sluggish growth environment is already here.


Source: 7IM


Summary


Investors should try to focus on the fact that investing in the stock market over the long term, is a powerful tool to preserve the purchasing power of their wealth and on ensuring that they have an appropriate asset allocation for the level of risk with which they feel comfortable. A disciplined approach to asset allocation and identifying good active managers who can navigate these conditions successfully remains of the utmost importance.


April 2024


With thanks to Seven Investment Management LLP for their views and market thoughts. RiverPeak Wealth Limited


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