Market Update April 2024

 By Mike Ross

Global Shares

In April 2024, global share markets experienced a notable pullback after a strong first quarter. Global shares fell by 2.6% in New Zealand dollar-unhedged terms, and 3.2% in NZD-hedged terms. The decline was primarily driven by a significant fall in the information technology sector, which was down by 5.6%. Despite this monthly setback, the annual performance of global shares remained strong, with unhedged returns up 24.2% and hedged returns up 20.5%, reflecting substantial gains over the past year.
Emerging markets bucked the trend, posting a positive return of 1.6% for the month and 15.2% over the year.

New Zealand Shares

The New Zealand share market mirrored the global trend, with the NZX50 falling by 1.2% in April. Over the past year, the index experienced a slight decline of 0.5%, indicating a challenging environment for local equities. Economic indicators point to a recession in New Zealand. Labour market conditions also deteriorated, with employment dropping and the unemployment rate rising.

Bonds Markets

Bond markets also faced a difficult month, with both New Zealand and global bond indices posting negative returns. NZ bonds fell by 1.2% while international bonds fell 1.6%. Rising yields contributed to these declines; the US 10-year government bond yield increased by nearly 50 basis points to 4.7%, while New Zealand's 10-year yield rose by 36 basis points to 4.9%. The persistence of inflationary pressures and cautious monetary policies from central banks, such as the Federal Reserve and the Reserve Bank of New Zealand, have kept bond markets under pressure, reflecting the broader economic uncertainties.

Outlook

Looking ahead, share market volatility is expected to persist, influenced by the interplay between economic growth and inflation. Investor sentiment has shifted from euphoric to more neutral globally, while New Zealand investors remain particularly cautious.