Market Outlook Winter 2024

The rapid decline of inflation caused a big shift in investors’ expectations about central bank interest rates. Until recently central bankers have insisted rates would rise further and then remain higher than markets were anticipating. As inflation has fallen further back towards its target, bond markets’ acceptance of this narrative has given way to expectations of significant rate cuts beginning in the first half of 2024.

This change in sentiment helped lift financial markets as government bonds experienced an aggressive rally. Rising bond prices pushed yields down from recent highs and the yield on benchmark ten-year US treasury bonds fell from almost 5% to 3.9%. UK government bonds also recorded significant gains as the 10-year gilt yield dropped to around 3.5%.

The potential for rate cuts spurred global equities to further gains. The US market outperformed led by large, high-growth technology. European equities also produced strong gains, despite economic activity declining. Japanese equities continued their recent rally, although at a slower pace. Emerging market equities received some respite as a weaker US dollar helped offset concerns about sluggish economic growth in China.

The price of oil fell, despite the outbreak of war between Israel and Hamas in Gaza, as the outlook for economic growth in 2024 deteriorated.

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This post is the opinion of Velarium Wealth and contains a document produced by FE Investments that we feel is relevant at the current time. This document has been prepared for general information only and is not guaranteed to be complete or accurate. It does not contain all of the information which an investor may require in order to make an investment decision.