April was a relatively quiet month, particularly in comparison to March and the first quarter more broadly.  Markets seemed to crave a period of calm after concerns over the US banking sector during the previous month, which generated heightened investor concerns and volatility. Ironically, the lack of sustained concern regarding the banking system in April (notwithstanding lingering question marks about the future of First Republic Bank) refocused market attention back to the possibility of further interest rate increases by central banks; especially given relative strong economic data and signs of more persistent underlying inflation. It also gave markets space to think about other potential risks such as the approaching US debt ceiling deadline. This is a deadline that comes around way too often (and shouldn’t really happen at all) and while it is inconceivable that the US government defaults on its debt, there is always a risk of a mistake, especially if brinkmanship is taken too far. The impact so far has been limited to the short-term US treasury bill market, but if we get closer to the June deadline without any resolution in sight, we may see more broader volatility.

Global equity markets (+1.4%) managed to post a positive return. Dovish language and the continuation of loose monetary policy by the Bank of Japan’s new governor helped stocks in Japan (+2.7%) generate some of the strongest returns.  In comparison, emerging markets (-0.7%) lagged, dragged down by weaker markets in Asia, specifically China and Taiwan as a result of heightened tensions between the two countries. In terms of style, value / cyclically oriented equities (+1.8%) slightly outperformed growth stocks (+1.2%). This was to some extent also reflected in the sector performance, with energy (+4.1%) and financials (+3.4%) among the best performing areas. However, it is important to note that the more defensive sectors such as consumer staples (+3.9%), healthcare (+3.5%) and utilities (+3.0%) also performed well in April. At the other end of the spectrum, information technology (-0.6%), and consumer discretionary (-0.8%) sectors trailed the most.

Within fixed income markets, despite the expectation that central banks would need to tighten policy further, bond yields were little changed on the month, meaning fixed income returns were broadly positive. Looking at the detail, global government bond prices rose (+0.4%), although UK gilts (-1.7%) declined sharply on the back of higher-than-expected inflation. Global investment grade credit (+0.8%) generated a positive return over the month as spreads tightened, and at the risker end of the credit spectrum the same was true with global emerging market debt (+0.5%) and global high yield (+0.7%) also increasing during April.

In terms of real assets, the more interest rate sensitive property and infrastructure markets marginally outperformed equities over the month, with the global listed infrastructure (+1.7%) and global REITs index (+1.9%) both generating positive returns. In comparison, commodities (-0.8%) fell, however, there was significant divergence across the different markets. Industrial metals (-3.4%) were the weakest area, due to doubts about future economic demand, closely followed by agriculture (-1.7%) due to declining wheat and corn prices. Crude oil (+2.2%) was one of the strongest areas, helped in part by the announcement that OPEC+ nations were cutting oil output at the start of the month. Gold (+1.0%) was also positive, with the year-to-date gain for the precious metal now +9.2%, supported by a weaker US dollar.

INDEX END MARCH VALUE END APRIL VALUE
FTSE 100 7631.74 7870.57
DJ Ind. Average 33274.15 34098.16
S&P Composite 4109.31 4169.48
Nasdaq 100 13181.35 13245.99
Nikkei 28041.48 28856.44
£/$ 1.2337 1.2567
€/£ 0.87902 0.87676
€/$ 1.0839 1.1019
£ Base Rate 4.25 4.25
Brent Crude 79.89 80.33
Gold 1969.28 1990.00

This month’s values quoted as at 28/04/2023. The above values are sourced from Bloomberg and are quoted in the relevant currency.