April 2024

Monthly Market Update

Overview

US equities closed lower as investors reacted to risks from heightened tensions in the Middle East. These tensions, along with the prospect of “higher rates for longer” saw investors book profit. The S&P 500 and Nasdaq Composite recorded their highest weekly losses in over 3 months, while the Dow Jones Industrial Average closed flat. European indices followed, closing lower despite the European Central Bank (ECB) opting to keep interest rates steady. The pan-European STOXX 600 and German DAX closed lower, while the French CAC 40 closed flat. Oil prices declined from their 6-month highs last week as investors grew fearful of a broader conflict in the Middle East, and US Crude Oil Inventories rose above consensus estimates. Ultimately, WTI and Brent crude prices finished lower at $83.14 and $87.29 per barrel, respectively. Meanwhile, gold prices hit a new all-time high on strong central bank demand, ending last week at $2413.80 per oz.

Outlook: We estimate that financial assets will commence their recovery after interest rates and inflation reach their peak. Any valuation reset through a market correction offers interesting opportunities for investors with a medium-to-long-term horizon. We believe that buying high-quality, profitable, blue-chip equities with strong balance sheets and positive free-cashflow yields will most likely result in double-digit return in the next 12 months. Fixed-income securities also offer attractive yields at these levels, without subjecting portfolios to much downside risk.

Developed Markets

North America
US equity benchmarks recorded a third consecutive week as concerns over heightened conflict in the Middle East. The S&P 500 and Nasdaq Composite lost 3.04% and 5.52%, respectively. The Dow Jones Industrial Average closed flat. Adding to this, investors grew increasingly concerned over the possibility of higher rates for longer, as a string of disappointing inflation data continued to alarm investors, whilst forcing the Federal Reserve to re-think its rate-cutting schedule on its first interest-rate cut. On this, Chair Jerome Powell said that it will likely take “longer than expected” to gain the confidence needed to lower rates, all but slashing hopes for more than two cuts in 2024 (while some worry that there may be no cuts at all). Powell’s lack of urgency to adjust rates echoes that of his colleagues. Fed officials are growing increasingly concerned that elevated interest rates may not be doing enough work to hamper overall demand. Thursday saw New York Fed President John Williams warn that additional rate hikes are possible if the data warrants. Atlanta Fed President Raphael Bostic said that policymakers would not be in a position to cut rates until the end of the year. On Monday, the Commerce Department reported that retail sales rose 0.7% in March, well above consensus expectations of around 0.3%. February’s gain was revised upward to 0.9%. The week began with news that Iran’s retaliatory strikes on Israel did not result in substantial damage, with nearly all missiles fired into the country intercepted by air defences. Nonetheless, markets grew fearful of a military response from Israel, following the Israeli war cabinet’s decision to retaliate “clearly and forcefully.” Friday saw stocks sink following Israeli strikes on air defence facilities within Iran, (as well as on Iran-backed groups in Iran and Iraq). Both sides were muted in their response to the assault – a sign that neither wanted to risk further escalation and a full-blown regional conflict. On this, Iranian commanders stated that there was minimal damage and that explosions near the central city of Isfahan were caused by air defences.

Europe & UK
European benchmark indices closed lower with their US counterparts as tensions rose in the Middle East. The pan-European STOXX Europe 600 Index lost 1.18%, followed by Germany’s DAX at 1.08%. The French CAC 40 closed flat while the UK’s FTSE 100 Index declined 1.25%. The previous week saw the European Central Bank (ECB) hold interest rates steady, with certain members strongly hinting that it would consider cutting interest rates at its next meeting in June. The ECB’s governing council met in Frankfurt where it announced that its benchmark deposit rate would remain at 4% until policymakers were convinced that price pressures reached a semblance of stability. ECB President Christine Lagarde told reporters that a minority of policymakers had argued for an immediate cut. Eurozone inflation has fallen from a 2022 peak of 10.6% to 2.4% in March – close to the central bank’s 2% target.” Lagarde said “bumps in the road” could cause inflation to “fluctuate” over the coming months before falling to its target by mid-2025. Nonetheless, multiple ECB policymakers reiterated at the recent International Monetary Fund (IMF) meeting that rate cuts would likely come in June, lowering borrowing costs. Lagarde seemed reluctant to say whether there might be more than one rate cut. Lagarde maintained her long-held position that would be dependent on incoming economic data, highlighting oil prices as being a key factor in light of heightened global tensions. Meanwhile, in the UK, CPI inflation (consumer prices index) UK grew at an annual 3.2% rate in March, a drop from February’s 3.4% – reaching its lowest level in over 2.5 years. Services inflation remained high but slowed to 6.0% from 6.1%. On this, Bank of England Governor, Andrew Bailey, voiced his optimism, stating “In the UK, we’re disinflating at what I call full employment,” he said at the IMF annual meeting. “I see, you know, strong evidence now that that process is working its way through.”

Japan
Tensions across the Middle East saw Japanese markets record substantial declines over the week, as energy prices came under the microscope (Japan being a net energy importer). The Nikkei 225 Index lost 6.18%, while the broader TOPIX Index declined 4.80%. Adding to woes, the Yen continued to hover near 34-year lows and finished the period in the mid-JPY 154 against the dollar. Investors continued to speculate as to whether Japanese authorities would intervene in the currency markets to prop up the yen, however, no such move has taken shape. The weakness did provide a boon for Japan’s export-driven companies, however. Japanese exports rose 7.3% year-on-year in March, slower than February’s 7.8% gain. Nonetheless, the latest data print represents a 4th consecutive month of growth in exports. On the inflation front, Japanese core consumer price index (CPI) came in at 2.6% year-on -year in March, slightly lower than had been expected and down from the 2.8% in February.

Emerging Markets

China
Chinese equities rose after the government reported stronger-than-expected economic readings across Q1 2024. The Shanghai Composite Index gained 1.52%, while the blue-chip CSI 300 rose by 1.89%. China reported that gross domestic product (GDP) rose by 5.3% in Q1, above estimates and higher than Q4’s 5.2% reading. On a quarterly basis, the economy grew 1.6%, rising from the Q4’s 1.4% expansion. Other data painted a less rosy picture: Industrial production rose 4.5% in March, coming in below estimates and lower than February’s 7% figure. Retail sales across March also grew below estimates, coming in at 3.1% from a year ago. On the policy front, the People’s Bank of China (PBoC) injected RMB 100 billion into the banking system via its medium-term lending facility (MLF) compared with RMB 170 billion in maturing loans and opted to leave the lending rate unchanged.

India
Indian equities closed mixed after following wholesale inflation readings. The BSE Sensex and Nifty 50 lost 1.56% and 1.65%, respectively. New data shows that economic activity continued to expand in April, driven by strength in both the services and manufacturing sectors. The services purchasing managers’ index rose to 61.7 from 61.2 in March, while the manufacturing purchasing managers’ index remained unchanged at 59.1. That drove the composite index to 62.2, the highest reading since June 2010. Readings above 50 indicate expansion compared with the previous month, while a print below that indicates contraction in activity. India’s economy is set to grow more than 7% in the current fiscal year, making it the fastest-expanding major economy in the world, providing a strong foundation for Prime Minister Modi’s re-election campaign. The Reserve Bank of India (RBI) has made price stability its primary objective, and has since maintained its hawkish policy stance, keeping the month the benchmark rate unchanged across 7 consecutive policy meetings.

MENA
Major MENA closed lower as regional tensions took the limelight. Saudi Arabia’s TASI and Dubai’s DFMGI declined by 1.62% and 0.84%, respectively. Geopolitical tensions within the region appear to still be weighing on investors, as Israel opted to respond opted to counter Iran’s drone barrage with a missile strike in the early hours of Friday. The strike hit the Isfahan region and comes after weeks of tensions between the regional rivals. US sources say a missile was involved in the attack, while Iran says it involved small drones. Meanwhile, In Saudi Arabia, the General Directorate of Civil Defence issued weather warnings and safety instructions across the nation as the country braces for heavy rainfall. Several regions across the Kingdom will experience medium to heavy rainfall accompanied by torrential downpours and hail until Tuesday, according to the authority. This comes after several neighbouring countries in the Gulf – including the UAE, Oman, and Bahrain – were hit by heavy storms that saw unprecedented levels of rainfall. The UAE experienced the highest-ever rainfall in a 24-hour period since climate data recording began in 1949.

Commodities and Forex

Commodities
Oil prices declined from their 6-month highs last week as investors grew fearful of a broader conflict in the Middle East, and US Crude Oil Inventories rose above consensus estimates. Ultimately, WTI and Brent crude prices finished lower at $83.14 and $87.29 per barrel, respectively. Meanwhile, gold prices hit a new all-time high on strong central bank demand, ending last week at $2413.80 per oz.

Currencies
The US dollar strengthened against a basket of currencies to its highest level since last November on the back of strong US economic data. The US dollar index finished last week 0.12% higher as retail sales data and manufacturing data both printed above consensus expectations. Relatedly, the Japanese yen continued its descent relative to the dollar and closed last week at ¥154.55, a new 34-year low.

Commodities

Name10/05/2430/04/2431/03/2431/12/23
WTI Oil ($/barrel)$78.26$81.93$83.17$71.65
Brent Oil ($/barrel)$82.79$87.86$87.48$77.04
Gold ($/oz)$2397.70$2324.70$2238.40$2091.80
Natural Gas ($/mmBtu)$2.25$1.99$1.76$2.51

Currencies

Name26/04/2431/03/2431/01/2431/12/23
Euro (€/$)1.07061.07881.08391.1041
Pound (£/$)1.25021.26221.27101.2746
Japanese Yen (¥/$)157.70151.38146.37141.02
Swiss Franc (CHF/€)0.97770.97300.93250.9289
Chinese Yuan Renminbi (CNY/$)7.11137.10707.10847.0842

Index Valuations

Index Return

Equities1 WeekMTDQTDYTD
S&P 5001.89%3.77%-0.47%10.03%
DJ Industrial Average2.20%4.53%-0.61%5.48%
Russell 20001.21%4.39%-2.95%2.07%
Russell Midcap2.00%3.51%-2.08%6.34%
STOXX Europe 50 (€)3.71%3.81%1.48%14.61%
STOXX Europe 600 (€)t3.18%3.39%2.39%10.21%
MSCI EAFE Small Cap1.35%3.17%0.18%2.70%
FTSE 100 (£)2.76%3.71%6.54%10.78%
DAX (€)4.28%4.69%1.52%12.07%
FTSE MIB (€)3.06%2.70%1.28%16.59%
CAC 40 (€)t3.37%3.23%1.07%10.14%
SWISS MKT (CHF)4.31%4.42%1.58%8.47%
TOPIX (¥)-0.01%-0.55%-1.45%16.42%
Hang Seng (HKD)2.96%7.09%15.06%12.16%
MSCI World1.83%3.58%-0.22%8.76%
MSCI China Freet1.68%6.12%13.34%12.96%
MSCI EAFE1.80%3.16%0.63%6.59%
MSCI EM0.99%2.57%3.05%5.56%
MSCI Brazil (BRL)-0.46%1.26%0.60%-3.93%
MSCI India (INR)-1.55%-1.71%0.61%7.01%

Fixed Income

(10/05/24)1 week %1 month %6 months %YTD %1 year %2 years %
US dollar Adventurous2.59%0.14%20.17%6.53%17.42%25.66%
US dollar Blue Chip1.94%-0.72%13.76%3.11%11.22%11.77%
US dollar Cautious1.54%-0.57%9.85%1.08%6.32%5.50%
US dollar Defensive1.11%-0.40%6.21%-0.66%1.69%0.25%
US dollar Performance2.34%-0.55%16.77%5.04%15.05%17.99%

Blend Fund Performance Year To Date:

Blend Fund Performance Since Inception:

Direct Fund Name

(10/05/24)1 week %1 month %6 months %YTD %1 year %2 years %
Aditum Global Discovery1.00%-0.41%13.31%5.89%9.82%11.70%
BlackRock GF World Healthscience USD2.17%3.07%16.41%7.70%8.10%16.30%
Emirates Global Sukuk0.77%-0.01%4.20%-0.47%1.53%2.77%
Emirates MENA Fixed Income1.38%-0.72%6.62%-1.80%2.36%0.81%
Emirates MENA Top Companies-0.44%-4.05%2.82%-1.91%-0.30%-13.13%
Franklin Gold and Precious Metals USD5.36%3.67%32.72%14.06%0.78%-0.15%
Harris Associates Global Equity2.45%1.41%14.87%3.63%9.45%17.73%
Loomis Sayles Global Growth Equity Fund4.62%-1.01%17.94%5.17%20.65%37.46%
Loomis Sayles Multisector Income Fund0.92%-0.32%7.16%-0.64%4.26%2.80%
PineBridge Japan Small Cap Equity2.07%-0.26%7.17%-3.73%-9.03%-4.89%
UBAM 30 Global Leaders Equity $2.59%-0.62%13.88%3.35%12.61%23.15%
iShares US Corporate bond Index-0.20%-2.39%6.16%-2.44%0.73%1.48%
iShares Developed World Index0.86%-3.67%21.99%5.67%18.51%22.44%

Zurich Managed Funds

(10/05/24)1 week %1 month %6 months %YTD %1 year %2 years %
US dollar Adventurous2.59%0.14%20.17%6.53%17.42%25.66%
US dollar Blue Chip1.94%-0.72%13.76%3.11%11.22%11.77%
US dollar Cautious1.54%-0.57%9.85%1.08%6.32%5.50%
US dollar Defensive1.11%-0.40%6.21%-0.66%1.69%0.25%
US dollar Performance2.34%-0.55%16.77%5.04%15.05%17.99%

Zurich Mirror Funds

(10/05/24)1 week %1 month %6 months %YTD %1 year %2 years %
ZI Canaccord Genuity Balanced1.83%-0.17%11.87%4.22%9.37%8.98%
ZI Canaccord Genuity Growth2.20%-0.62%13.13%4.47%10.99%12.18%
ZI Canaccord Genuity Opportunity2.15%-0.41%14.75%6.90%15.79%16.34%
ZI Emirates Active Managed fund0.14%-1.15%12.85%1.94%5.42%-0.46%
ZI Emirates Balanced Managed fund0.11%-0.96%9.20%0.94%1.22%-5.05%
ZI Emirates Emerging Market Debt2.17%0.10%12.28%1.43%6.53%1.22%
ZI Emirates Emerging Market Equity2.33%-0.64%16.13%2.06%14.36%1.03%
ZI Emirates Islamic Balanced Managed fund0.12%-1.07%7.33%2.05%4.65%-0.10%
ZI Loomis Sayles U.S. Growth Equity1.67%-2.18%19.89%8.09%32.69%48.96%

* Data is lagged by 1 day.
**   Data is lagged by 2 days.