Global stock markets gained in March, closing the first quarter of the year with strong gains across the board. Only the Chinese and Hong Kong markets are still struggling to rebound. Expectations of interest rate cuts in the US boosted shares although the pace of cuts is likely to be slower than the market had hoped for in the beginning of the year as a result of sticky inflation and a resilient labor market.

In the US the Dow Jones, S&P500 and Nasdaq Composite indexes gained 2,08%, 3,10% and 1,79% respectively in March, and 5,62%, 10,16% and 9,11% respectively throughout the first quarter. The Federal Reserve (Fed) kept interest rates on hold at 5,5% for a fifth consecutive time. US inflation ticked up slightly to 2,5% year-over-year in February but core inflation, which excludes the volatile food and energy prices, is still trickling down, albeit very slowly, and stood at 3,8% in February. Even so, this is still too elevated for the Fed to consider a rate cut.

Annualised US GDP growth for Q4 was revised up in the third estimate to 3,4%. In the labor market the Nonfarm payrolls continued to exceed estimates while the unemployment rate remained firmly below 4%. While Fed chair Jerome Powell said that the central bank still expects rate cuts this year, they are unlikely to occur in the first half of this year, and now speculation arises whether they will be cut at all in 2024 – some even suspect an increase may be due to further tame the sticky inflation.

In the Eurozone the situation is different. Eurozone inflation continued to cool in the quarter. The annual inflation rate was 2,6% in February, down from 2,8% in January. Core inflation in March dropped to 2,9%, the lowest level in 2 years. In addition the unemployment rate stood at 6,5% in February and GDP growth is basically non-existent with Q4 GDP growth coming in at 0,1% year-over-year. While European Central Bank (ECB) President Christine Lagarde sought to downplay the chances of an imminent interest rate cut, we do expect it to happen in the very near future.

Also European indices performed well: the Eurostoxx 50, DAX and CAC indices gained 4,22%, 4,61% and 3,51% respectively in March, and 12,42%, 10,39% and 8,78% respectively throughout the first quarter. The SBITOP index even outperformed that, adding 17,40% during the first quarter to close at 1466,69. The dollar remained quasi unchanged against the Euro, closing at 1,0793.

Also United Kingdom FTSE index managed to book a gain of 4,23% gain in March to turn its first quarter performance to a modestly positive 2,84%. Inflation in the UK is tumbling down and stood at 3,4% in February (it still stood above 10% in April 2023). Nonetheless the Bank of England still maintained its interest rate at 5,25%.

The main winners in march were the precious metals. Gold reached an all-time high and gained 9,74% to close March  at 2254,8$ per ounce. Also silver gained 9,68% as the delayed interest rate cuts push investors towards precious metals as a hedge. WTI oil futures gained a solid 6,27%, closing at 83,17$ per barrel. In fact all energy commodities gained with exception of natural gas. That is also somewhat of a concern as it may stoke inflation again.

Rudy Marchant
Fund manager Primorski skladi

Monthly reports - March 2024