Research Insights | Market Commentary March 2024
In March equities moved higher and many markets continued making new all-time highs as bond yields fell slightly driven by the further expectation that central bank rate cuts are due to occur in 2024. However, the Bank of England, the European Central Bank and the US Federal Reserve are yet to cut rates after their recent tightening cycles.
The Bank of Japan (BOJ) raised rates in March which is their first rate hike in 17 years and they have finally moved away from negative interest rates. Inflation has exceeded the BOJ’s 2% target over the year. The BOJ statement was “dovish” in its tone and markets shrugged off the rise to a cash rate of 0-0.1%. Conversely, the Swiss National Bank was the first “G7” (a group of seven advanced industrial economies) central bank to cut rates with a reduction of 0.25% to 1.50%.
The US Federal Reserve (FED) held rates steady in March. However, they did slightly raise their growth and inflation expectations for 2024. Despite the increase in inflation and growth expectations FED members are still forecasting three rate cuts in 2024.
The RBA met on the 19th March and left the cash rate unchanged at 4.35%. The RBA noted that “while recent data indicate that inflation is easing, it remains high. The Board expects that it will be some time yet before inflation is sustainably in the target range. The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the Board is not ruling anything in or out”.
Australian large cap Equities rose by 3.1%, the only sector that didn’t advance was Communication Services (-0.6%). Australian Real Estate Investment Trusts (A-REITs) rose by 9.7% and Energy (+5.3%) and Utilities (+4.8%) also performed well. Hedged global equities rose by 3.4% whilst unhedged global equities rose by 3.0%, the Australian dollar was relatively flat in March buying US$0.6521. One dynamic seen in markets in March was small and midcap companies, that over the last 12 months have underperformed, outperformed large caps - the belief that a recession will be avoided, funding costs will reduce and profit taking in the large cap names that have done well assisted this cohort of stocks.
The Australian 10-year government bond yield decreased by 15bps to 3.99% and the 2-year government bond yield decreased by 6bps to 3.68%. The US 10-year government bond yield fell by 5bps to close at 4.21% and the US 2-year government bond yield fell by 2bps to 4.63%.
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