Market Review – Quarter 1 2024

5 min read 18 Apr 24

This quarter we’re looking at Inflation, the US Economy as well as Japan.

Please note, the value of your investment can go down as well as up so you might not get back the amount you put in. All figures mentioned in this article are accurate as at the time of writing. 


Markets started 2024 on the front-foot, with resilient economic data and strong earnings reports leading stockmarkets higher. The global stock index increased around 9% with Japan and US stocks leading the way. In contrast, the dramatic fall in government bond yields towards the end of 2023 has been partially reversed (yield relates to the coupon you receive from a bond to its price). The yield on a 10 year US government bond rose from 3.89% to 4.20% and the return on the global bond index for the quarter was –0.05%. Both corporate bonds and emerging market bonds have outperformed global bonds. The US corporate bond market attracted a lot of money from investors this year, who’ve looked for the highest yields in years.

Resilient US Economy

The resilience of the US economy last year caused economists to repeatedly push back calls for a recession to a later date. Today, the consensus is for a scenario where growth moderates but doesn’t contract (a ‘soft-landing’ in financial jargon). The data released in the first quarter of  2024 confirmed this expectation; the US economy has continued to add jobs and the US GDP (Gross Domestic Product) growth in the fourth quarter was 3.3%. GDP is a backward-looking figure but ‘live’ monitoring tools for GDP suggest growth is still running at 2.9% for the first quarter – a picture of resilience. This is also confirmed with recent business activity surveys showing growth. We think this backdrop of better company earnings growth and continuing economic resilience is more supportive for stocks and shares than bonds.


The US Consumer Price Index (CPI) rose by 3.2% year-on-year in February (vs 3.1% year-on-year in January). The cost of petrol and shelter (including rents) contributed to the overall increase. In February, core inflation (which strips out volatile inputs like food and energy) remained unchanged at 0.4% month-on-month. The Federal Reserve (the Fed) held interest rates at 5.25%-5.50%, lowered the expected rate cuts this year to three, and also raised its long-term rate outlook. The Fed also projected strong growth and jobs for the next year. Jerome Powell, The Fed Chair, said more data would be needed to change interest rates.

In the UK, inflation has stayed at 4% in recent months. A key component of assessing the path for UK prices, is wage growth, which has continued to slow but remains high at 5.6% per annum. The UK experienced a technical recession in the final quarter of 2023, with a -0.3% reduction in GDP. High inflation and a more expensive cost of borrowing rate have been key themes. The Bank of England have left interest rates at 5.25% and warned that high rates would continue until inflation falls below 2%. UK gilts suffered, falling 1.62% this quarter.

High hopes for Japan

After eight years of negative interest rates and 17 years since the last rate increase, the Bank of Japan lifted the rate from -0.10% to 0%. We anticipate the global economy will continue to grow this year and believe this will benefit the Japanese stockmarket. The Japanese stockmarket has a lot of cyclical sectors (sectors that are dependent on the strength of the overall economy) with industrials, consumer discretionary (‘wants’ rather than ‘needs’) and financials making up 70% of the index. These sectors can be more sensitive to changes in economic growth – so when the economy does well, these sectors also tend to do well.

Companies continue to grow earnings

Companies listed on stock exchanges publish reports each quarter on their sales, profits, assets held and other financial metrics. This information lets investors test if the ‘views’ of the economy are accurate and if the story each quarter was a positive one. The projected revenues of US companies for the first quarter of 2024 exceeded what was expected. A handful of large companies generated all the growth in earnings for the US market, and we expect this to broaden across more companies as the year progresses.

The US stockmarket was up 11.57% in the first quarter, which was one of the top markets this quarter. The “Magnificent 7” companies (companies with a capitalisation or market value of over $200 billion)  boosted performance. One of these, NVIDIA, an artificial intelligence (AI) chip maker, had great earnings last quarter. It also launched a new chip this month that could cement its dominance. AI is continuing to attract attention, with Canada and the UAE (among others) trying to entice European and UK AI tech firms to relocate. The US economy remains strong and US companies are earning higher profits in comparison to those in other parts of the world.

The views expressed here should not be taken as recommendation, advice or forecast. We are unable to give financial advice. If you are unsure about the suitability of your investment, speak to your financial adviser. 

By M&G Investments

Related insights