New York, USA – Global equity markets have seen a strong start to the year, with a gain of 8.9%. Initially focusing on the potential growth of artificial intelligence and its impact on corporate profitability, the markets shifted their attention to better-than-expected economic data emerging not only from the U.S. but also from Europe and China. This boost in market confidence led to a broadening of the bull market regionally, with Europe closing up by 7.6%, closely trailing the U.S. at 10.3%. However, Asia showed some weakness, resulting in emerging markets only returning 2.4%.
The first quarter of the year witnessed a continuation of quality and growth performing well in developed markets. Momentum emerged as a strong leader, highlighting double-digit outperformance in both the U.S. and globally. On the other hand, small-cap equities faced challenges due to the delay in rate cuts, experiencing a significant underperformance compared to the previous quarter. Factors such as high dividend, value, and minimum volatility also faced obstacles.
In emerging markets, momentum showed strength alongside growth, with Information Technology stocks and new economy companies benefitting the most from the positive economic news. The MSCI World and MSCI USA indexes reflected a strong performance in the first quarter, with the impact of the AI megatrend being prominently felt. Notably, Nvidia experienced a significant gain of 82.5% during the quarter, contributing to the market’s overall performance.
The overall market performance saw some diversity in sources, with only four out of the Magnificent 7 surpassing the S&P 500 in the quarter. Notably, Nvidia and Meta displayed significant outperformance. In terms of factors, it was a challenging quarter where many factors underperformed, leading to some rotation in the market. Growth and quality continued to outperform in global developed markets, while momentum stood out as the strongest factor of the quarter, delivering double-digit outperformance across all regions.
Looking ahead to the second quarter of 2024, despite the robustness of economies and the ongoing trend of “higher for longer,” rate cuts are anticipated to make an appearance. The combination of looser monetary conditions, improving economies, and expanding markets is expected to provide support to equity markets. However, with valuations at relatively high levels and the impending U.S. presidential election, risks remain present. A balanced approach to equity investment that considers both upside potential and downside protection could prove to be a prudent choice for investors moving forward.
