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T&IO Weekly Market Update

5 min read 23 Feb 24

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Your update produced by our in-house experts from the M&G Treasury and Investment Office (T&IO) can be read below.

Strong guidance from Nvidia boosted technology stocks and pushed the S&P500 index to a new record high this week. Nvidia reported a dramatic +265% increase in sales compared to a year earlier and reported $22.1bn of revenue in Q4. It has now become the third most valuable US-listed company and contributed more than a quarter of the S&P500’s year-to-date growth. Investors’ enthusiasm about the potential of artificial intelligence helped broader market risk-on sentiment. Nikkei surpassed its all-time high, exceeding the record level reached during the country’s late-1980 asset bubble, and recorded an almost +17% gain over 2024 so far. German DAX index and French CAC40 index both also closed at all-time high, with tech stocks the largest drivers of market gains.

In the US, policy makers saw no urgency to cut interest rates after the strong January employment report and the overshoots to the Consumer Price Index (CPI) and Producer Price Inflation (PPI). The Fed’s January meeting minutes reflect that the Committee “remained highly attentive to inflation risk”, and the Fed needs to see more data pointing to declining inflation toward the 2% target. Investors dialled back their expectations for rate cuts at the Fed’s March meeting as a result. In the Eurozone, the European Central Bank (ECB) wage tracker slowed in 4Q to 4.46% from 4.69%, and 2024 growth forecasts for some countries, such as France and Germany, continued to be revised down. Slowing wages and economic growth increase the possibility of a dovish tweak in the ECB March meeting. The Bank of England Governor Andrew Bailey highlighted that market expectations of rate cuts are “not unreasonable” and that inflation does not need to fall to target before rates can be cut.

While central banks continue to keep monetary policy tight enough to drive inflation back towards the 2% target there is growing evidence of a continued softening in prices. This has led focus to turn to the potential for central banks to ease policy rates to prevent further restriction to the economy and the prospect of a global economic ‘soft landing’. While recent central bank meetings have suggested the next move in interest rates will be downwards, officials have been cautious to confirm when these cuts will be implemented, with a careful eye on data to ensure a sustainable route back to the inflation target.

Please note that the below is relevant for all Prudential multi-asset funds. The tactical asset allocation comments relate to the WS Prudential Risk Managed Active and Passive ranges.

With continued disinflation traction, alongside the continued positive fundamentals of the US economy and the spill-over effects this could have globally, we remain moderately overweight equites (+2.25%), with funding from European IG (-1.50%) and Cash (-0.75%).

*Please note that the tactical asset allocation (TAA) commentary does not apply to the PruFund range of funds. The TAA mandate is run by the Macro Investment Business (MIB) within M&G.

Equities

1 Week

YTD

1 Year

S&P 500

1.64%

6.87%

28.83%

FTSE 100

-0.02%

-0.06%

1.18%

Euro Stoxx 50

1.80%

7.53%

16.83%

MSCI Asia Pacific ex Japan

1.21%

-0.03%

3.61%

MSCI China

2.68%

-1.92%

-16.34%

Government Bonds

1 Week

YTD

1 Year

Bloomberg Global Sovereign Index

0.09%

-2.30%

3.75%

Global Corporates

0.12%

-1.36%

5.11%

Global High Yield

0.35%

0.66%

11.06%

Asia Local Ccy Bonds

-0.55%

-0.64%

0.45%

Source: Bloomberg as at 9:07am on 23.2.24

Information provided has been obtained from sources that M&G Treasury and Investment Office (T&IO) believes to be reliable and accurate at the time of issue but no representation or warranty is made as to its fairness, accuracy, or completeness. The views expressed herein are subject to change without notice. No person should rely on the content or act on the basis of any matter contained in this document without obtaining specific professional advice. Neither T&IO, nor any of its associates, nor any director, or employee accepts any liability for any loss arising directly or indirectly from any use of this video. Reference to the names of each asset class/company mentioned in this communication is merely for explaining the investment strategy, and should not be construed as investment advice or investment recommendation of those companies.

The value of investments and any income from them may go down as well as up and are not guaranteed. Investors may get back less than the original amount invested and past performance information is not a guide to future performance.

‘M&G Treasury & Investment Office (T&IO)’ includes the team formerly known as Prudential Portfolio Management Group (PPMG). Prudential Portfolio Management Group Limited, is registered in England and Wales, registered number 2448335.

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