Market Review – March 2024

UK

A “weak” recession: the UK economy slipped into recession during the final quarter of 2023: having contracted by 0.1% in the third quarter, it shrank by 0.3% during the final three months of the year, dampened in part by weakness in manufacturing and in consumer-facing services. Over 2023 as a whole, the UK economy grew by only 0.1%. Nevertheless, Bank of England (BoE) Governor Andrew Bailey highlighted “distinct signs of an upturn”, suggesting that “this is the weakest (recession) by a long way” in comparison to previous recessions. The FTSE 100 Index ended February unchanged, while the FTSE 250 Index fell by 1.6% over the month.

Edging closer towards a rate cut? The Bank of England (BoE) maintained its key interest rate at 5.25% for another month. Policymakers appear to be shifting towards a looser monetary stance, although Governor Andrew Bailey insisted that they needed to “be confident that inflation is set to fall all the way back to the 2% target – and stay there” before cutting rates. In any case, a cut in the near future is not a foregone conclusion: the BoE expects inflation to tick up slightly during the third quarter.

Wage growth slowing: the rate of consumer price inflation remained unchanged at 4% year on year in January as higher prices for electricity and gas were offset by lower prices for food, furniture and household goods. Growth in average earnings (excluding bonuses) slowed during the final quarter of 2023 from 6.6% to 6.2%.

Consumer confidence on the up? After a poor December for retail sales, in which volumes fell by a record 3.3%, consumers returned to the shops in January, generating a 3.4% increase. The British Retail Consortium reported that annualised shop price inflation had fallen to its lowest rate since May 2022. Elsewhere, although confidence amongst UK consumers edged lower in February, according to GfK’s monthly survey, overall optimism over their personal financial situation over the next 12 months remained stable, suggesting an improvement in the nation’s financial mood.

FTSE UK reshuffle: in its quarterly review of UK equity index constituents, FTSE Russell announced that budget airline easyJet would join the FTSE 100 Index in March, replacing Endeavour Mining, which will move to the mid-cap FTSE 250 Index. Other companies set to join the FTSE 250 Index include Kier Group and Wincanton.

 

Global

A record month: US stock markets continued to forge ahead during February: the Dow Jones Industrial Average Index reached a new closing high, while the S&P 500 Index breached 5,000 points for the first time. Over February as a whole, the Dow rose by 2.2%, the S&P 500 Index increased by 5.2%, and the Nasdaq Index climbed by 6.1%. The ‘Magnificent Seven’ continued to make a splash: in particular, Nvidia rose by 28.6% over the month.

FOMC remains circumspect: the annualised rate of consumer price inflation in the US eased from 3.4% in December to 3.1% in January; however, the rate of core inflation remained unchanged at 3.9%. Minutes from the January meeting of the Federal Open Market Committee suggested that policymakers remained cautious about the risks of “moving too quickly” to cut rates, preferring to wait until they have “greater confidence that inflation is moving sustainably toward 2%”. The US labour market remained strong in January: the economy added 353,000 new jobs during the month, compared with a monthly average of 255,000 during 2023. The rate of unemployment remained at 3.7%; meanwhile, average hourly earnings rose at an annualised rate of 4.5% during January, stoking some concerns about lingering inflationary pressures.

Germany set to “tread water”: the rate of inflation in the eurozone crept lower during January, falling from 2.9% year on year in December to 2.8%. Elsewhere, Germany’s central bank, the Bundesbank, warned that the country’s economic recovery is likely to begin slightly later than previously expected. Economic output could once again decline during the first quarter, which would push Germany into a technical recession. Over 2024 as a whole, the Bundesbank expects the German economy to “tread water”. Nevertheless, according to the Ifo Institute, business sentiment amongst German companies picked up during February, and the Dax Index rose by 4.6% over the month.

Nikkei reaches highest level for 34 years: Japan’s economy entered recession following the news that it had contracted for two consecutive quarters. The economy shrank by 0.4% between October and December, undermined by a decline in private demand. Nevertheless, the Nikkei 225 Index rose by 7.9% during February, and also reached a new closing high during the month, finally surpassing its previous peak set on 29 December 1989.

As ever, if you have any questions regarding your investments, please do not hesitate to contact us by calling +44 (0) 7917 390 344  or emailing me at richardbrazier@culverfinancial.co.uk and we will be happy to talk to you.