Monthly report for March 2024
The YTD return in P+ accounted for 3.62 percent as of 31 March which is an increase of 1.2 percentage points compared to the end of February.
The month’s portfolio returns accounted for 1.6 percent for shares, 2.2 percent for special investments, 0.1 percent for credit bonds, 0.9 percent for bonds and 0.7 for real assets. Accordingly, all assets classes contributed to the postive return.
2024 is off to a strong start with a positive first quarter where the stock markets have delivered handsome returns. The positive development for risky assets was delivered on basis of continued strong key performance indicators, especially in the US where the market placed more emphasis on the positive impact of improved growth than on the negative impact of interest rates remaining at high levels.
While focus in the US and Europe remains on when we will see the first interest rate cuts, Bank of Japan (BoJ) turned the tide by hiking its key interest rate for the first time in 17 years. The Boj thus brought an era of negative interest rates to an end by increasing its key interest rate to a span between 0-0.10 percent. Since it is a minor change, it is not expected to impact the financial markets significantly, but in order to assess the further impact it is decisive if it was an isolated interest rate change to escape negative interest rates, or it will be the start of a lengthy cycle of interest rate hikes in Japan.
Following a period of weak European key performance indicators, the composite PMI showed, for the first time since May 2023, a value above 50 which indicates economic prosperity. The service sector did best with a PMI of 51.5, while the manufacturing PMI continues to lag behind with a PMI of 48.1, and especially the manufactoring sector in Germany seems to suffer.
While the economic growth picture supports the stock market which has seen one of the strongest first quarters despite increasing interest rates in the same period, focus is increasingly pointed at the development in the inflation rate, especially in the US where March brought us a higher inflation rate than expected. In the coming months, focus will be on fighting the last part of inflation and whether the economic growth may result in another increase in the inflation rate. The market expects interest rate cuts from both the European and the US central banks later this year, but an increased level of inflation may imply that they have to disappoint the market.