2024 started with strong gains in equity markets. Growth was observed in both developed and emerging markets, with US stocks outperforming their global peers. Similarly to 2023, mega-cap tech companies were the major contributors to a broad market rally. This positive dynamic was underlined by improved investor sentiment, partly fueled by a stronger than expected US economic performance (the US economy grew by 2.5% in 2023 and, according to IMF forecasts, is expected to grow by 2.7% in 2024).
Yields have increased considerably in the US fixed income markets. Due to a stronger than expected economic activity in the US, returning inflation to the target level of 2% is expected to take more time than previously expected (during the past four months, core inflation has only slowed from 3.9% to 3.8%). As a result, markets are now only pricing in two or three 25bps rate cuts from the US Federal Reserve in 2024.
In the light of shifted expectations, yields have increased in fixed income markets and currently stand well above the 2023 minimum levels.
