The global equities market started the year on a strong note, with the S&P 500 Index even momentarily reaching all-time highs despite the high interest rates being at levels. The rally in the Magnificent 7 (Meta, Apple, Amazon, Nvidia, Microsoft, Alphabet and Tesla) continued into 2024. The fund was flat for the month of January underperforming the MSCI World Index which was up 3.7%*. Optimism in the market stemmed from the continued economic resilience displayed by the US economy, dampening recession fears. US GDP grew by an annualised rate of 3.3% for the fourth quarter- higher than estimate of c.2%- due to government spending, business investments and exports; this growth follows a 4.9% growth for the third quarter. Growth has been supported by the strong labour market; nonfarm payrolls increased by 353 000 jobs in January (while in December it was 216 000 jobs) and wage growth is impressively above pre-Covid average despite tighter monetary conditions.
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Europe also released their GDP numbers and in contrast to the US, the region marginally missed recession, as the economy’s GDP remained flat in the fourth quarter of 2023 following a 0.1% decline the third quarter. Their largest economy, Germany, also marginally missed recession as it contracted by 0.3%. Taiwan’s GDP increased by 5.12% for the fourth quarter, however, for 2023 its preliminary GDP growth was 1.4% compared to 2.45% growth in 2022. This is their slowest growth pace in 14 years but it’s expected that this growth should increase this year due to strong demand for AI applications which will see increased demand for semiconductors.
In terms of monetary policy, all the major central banks left their rates unchanged; this would be the Fed, ECB (European Central Bank) and the BoE (Bank of England). Locally, the SARB left interest rates unchanged as well. In terms of the fixed income market, the US curve steepened as the 30-year bond yields increased by 0.19% to 4.22%- bond yields and prices have an inverse relationship therefore a rise in yields results in a decline in bond prices. In terms of the fund, the best performers were Crowdstrike (15%), Itochu (13%) and Marubeni (10%) for the month. While the worst performers were AIA Group (10.5%), Arena Reit (8.6%) and Idexx (7.2%)
In conclusion, the global equities market showed resilience with the Magnificent 7 continuing their rally. The US economy outperformed expectations with strong GDP growth in Q4, reinforcing market optimism. However, Europe faced economic challenges, with GDP remaining flat in Q4. Major central banks maintained stable monetary policies and the US yield curve steepened. Overall, the market displayed resilience amid varied global economic performances.