The strong rally in equities market continued for the month of March. This is the fifth consecutive month of positive equity returns mainly due to the big tech companies, energy, and financial sector. MSCI World Index was up 3.3%* for the month of March, outperforming the fund which was up 1.8%*. In terms of underlying names in the fund, the best performers were Arena Reit (+17%*), Alphabet (+9%*) and Novo Nordisk (+7.9%*).
All returns are in USD
Central Banks have continued to be primary influencers of market sentiment. Most central banks in developed markets opted to maintain unchanged interest rates for the past meetings. Concerns over persistent inflationary pressures remained at the forefront for many policymakers, as they vigilantly monitored economic vitality. The Fed held rates at a 23-year peak of 5.5% for the fifth consecutive session in March 2024, aligning with market forecasts. Similarly, the European Central Bank (ECB) upheld its interest rates at historically elevated levels, with the primary rate holding steady at a 22-year high of 4.5%. The Bank of England, during its March assembly, kept the Bank Rate at 5.25%, as the central bank awaited clearer indications that the nation's enduring inflationary pressures were waning. Here at home, the SARB left the repo rate unchanged at 8.25%; the decision was unanimous, with all committee members choosing to keep rates on hold.
During the month, the Fed unveiled its quarterly "dot plot," officially termed the Summary of Economic Projections, marking a significant turning point. This report outlined projections for interest rates, revealing an expectation for three rate cuts totaling 75 basis points within the year, 75 basis points in 2025 and another 75 basis points in 2026, totaling 2.25 percentage points. Fed Governor, Jerome Powell, reiterated the anticipation of lower rates, citing the movement of inflation toward the 2% target. Similarly, the ECB Bank hinted at a potential rate reduction at its June gathering, shaping market anticipations.
Earnings season officially starts in April, with market expectations of S&P 500 companies to report earnings growth for the fourth consecutive quarter. However, its important to note that even if companies beat market expectations for earnings their shares might not rally as much because positive earnings surprises could already be priced in and persistent inflationary pressures which could negatively impact market volatility and uncertainty thus negatively impacting share prices.
In conclusion, March saw continued equity market strength, driven by tech, energy, and finance sectors. Central banks maintained rates amid inflation concerns. As earnings season nears, beating expectations may not spur significant rallies due to pre-priced optimism and inflationary pressures. Therefore, vigilance and adaptability remain key in navigating market dynamics.