Weekly Market Update and Featured Chart #11

This week’s market update highlights the latest economic news and general market performance across the UK, US and Asia. Here’s the key takeaways:

• Good news for shoppers – UK store inflation fell to its lowest level in over two years, with a rise of 1.3% in March, compared to 2.5% in February. Food price inflation also eased for the 10th straight month in a row to 3.7%.
• Bouncing back – Things are looking up as the manufacturing sector in the US is finally showing some improvement. The ISM Manufacturing PMI rose to 50.3 in March from 47.8, which means it's expanding again after being in a slump for 16 months.
• Making progress – Inflation in the Eurozone slowed down to 2.4% year-on-year in March, which is below expectations of 2.6%. Core inflation also eased to 2.9%. Services inflation remained sticky however and was unchanged for a fifth consecutive month at 4%.
• Gold still on the up – The price of Gold set another record high this week breaching $2,300 an ounce. Positive investor sentiment coupled with Gold’s track record for holding its value is pushing the price up higher.
• Oil’s on a tear – The price of oil surged past $90 a barrel on Thursday. Tensions in the Middle East and possible cuts in production from OPEC+ countries are driving the price up further.

Progress continues to be made on the inflation front, but that’s not a reason to get complacent. Recent positive data is encouraging, but we need to remain vigilant. Factors like tensions in the middle east could have far reaching consequences, particularly if they drive up oil prices, potentially reigniting inflation. Diversification remains key, not just across bonds and equities, but also across commodities and other real assets, as this week has shown.

Chart of the week

The return of Bloomberg global 60:40 index from 2015 to March 2024.

After all the death of 60/40 rhetoric in 2022, Bloomberg’s global 60:40 index (tracking a classic balanced portfolio of 60% stocks and 40% bonds) has managed to return to its peak from the end of 2021, before the market was surprised by a hawkish turn from the Fed.

This week saw a reversal in market dynamics with the UK outperforming the US by around 2.5%. Most of this shift came on Wednesday, marked by drops of 1.23% for the S&P 500 and 1.40% for the Nasdaq. The tensions in the middle east seemed to be at the forefront of the drop which also saw oil surge higher to peak at over $90 a barrel. Ultimately a higher oil price can drive inflation higher, impacting the expected pace and severity of anticipated rate cuts already factored into the markets.

Both UK Gilts and US treasury yields saw slight increases as investors sought safe havens amidst geopolitical tensions. Meanwhile, Gold soared to a record high, reflecting positive sentiment towards the precious metal.

In our latest Let’s Talk Markets podcast, Isaac and Patrick Ingram talk sunny prospects for investors – listen now!

This article is for financial professionals only. Any information contained within is of a general nature and should not be construed as a form of personal recommendation or financial advice. Nor is the information to be considered an offer or solicitation to deal in any financial instrument or to engage in any investment service or activity. Parmenion accepts no duty of care or liability for loss arising from any person acting, or refraining from acting, as a result of any information contained within this article. All investment carries risk. The value of investments, and the income from them, can go down as well as up and investors may get back less than they put in. Past performance is not a reliable indicator of future returns.