Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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April market performance: Working hard or hardly working for your returns?
Market Rewind
Søren Otto Simonsen
Senior Investment Editor
Summary: As the beginning of May marks the celebration of international worker’s day, we look back at a 2023 where market performance, above anything else, has been random, because no one really knows what to believe. So, there’s almost an equal chance of positive returns from working hard to try and find the right instruments, or hardly working and investing passively. April performance is no different, although a positive start to the earnings season has sprinkled green over the markets.
Global equities returned 1.6% in April. Comparatively, April was a muted month in terms of market performance. In fact, we need to go all the way back to May last year to find a smaller movement in either direction for global equities. As evident from below, it’s pretty much across the board that performance has been treading water compared to the last few months. While this – on the face of it – could suggest that everything is calm and quiet, it’s rather an expression of investors not knowing which leg to stand on rather than an expression of the markets being a sunny Sunday ride.
And a muted performance like that really shows the dichotomies that are challenging markets and making it so hard to figure out if we’re going up or down. Regionally, the US and Europe show strength, returning 1.5 and 2.0 pct. respectively, while Asia (-1.1%) and Emerging Markets (-1.3%) are pulled down by, especially, China’s challenges with growth concerns and geopolitical confrontations.
You can see similar conflicting points in other places in the financial world. For instance, macro figures where the general question is whether there’s a need for increasing interest rates or whether they have already been raised too much. Because inflation is still roaring, while earnings, job reports and other key numbers remain strong.
Even within sectors, April performance volatility was less than we’ve seen in a while, with no sector rising more than four pct. or falling more than one. Energy was the worst performing sector, probably due to the seasonal effect of milder spring weather and the decreased need for energy to heat up homes.
The best performing sectors were materials, consumer discretionary and real estate, all climbing more than three pct. Referring to the previous discussion about interest rates and whether they should be going up or down, the fact that consumer discretionary and real estate are among the best performing sectors indicates that consumers continue to spend money. Information technology, which is always a sector in focus, also performed well (2.9%), especially helped by positive earnings from a company like Meta.
The Global bond performance index we track in this series increased with 0.5 pct. with corporates increasing slightly more than sovereigns. Like the rest of the financial market, this is mainly an expression of the insecurity in terms of whether markets should be moving one way or the other.
Check out the rest of this month’s performance figures here:
Sources: Bloomberg & Saxo Group
Global equities are measured using the MSCI World Index. Equity regions are measured using the S&P 500 (US) and the MSCI indices Europe, AC Asia Pacific and EM respectively. Equity sectors are measured using the MSCI World/[Sector] indices, e.g., MSCI World/Energy. Bonds are measured using the USD hedged Bloomberg Aggregate Total Return indices for total, sovereign and corporate respectively. Global Commodities are measured using the Bloomberg Commodity Index. Oil is measured using the next consecutive month’s WTI Crude oil futures contract (Generic 1st 'CL' Future). Gold is measured using the Gold spot dollar price per Ounce. The US Dollar currency spot is measured using the Dollar Index Spot, measuring it against a weighted basket of the following currencies: EUR, JPY, GBP, CAD, SEK and CHF. Unless otherwise specified, figures are in local currencies.
Global equities are measured using the MSCI World Index. Equity regions are measured using the S&P 500 (US) and the MSCI indices Europe, AC Asia Pacific and EM respectively. Equity sectors are measured using the MSCI World/[Sector] indices, e.g., MSCI World/Energy. Bonds are measured using the USD hedged Bloomberg Aggregate Total Return indices for total, sovereign and corporate respectively. Global Commodities are measured using the Bloomberg Commodity Index. Oil is measured using the next consecutive month’s WTI Crude oil futures contract (Generic 1st 'CL' Future). Gold is measured using the Gold spot dollar price per Ounce. The US Dollar currency spot is measured using the Dollar Index Spot, measuring it against a weighted basket of the following currencies: EUR, JPY, GBP, CAD, SEK and CHF. Unless otherwise specified, figures are in local currencies.
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