Encouraged by the strong performance in the US economy and the continuing enthusiasm over artificial intelligence, stocks have reached new highs in several regions, and Japanese stocks have reached levels not seen in over three decades.
Comforted by the continuing growth in the US and decent earnings, markets remain bullish overall even though the numerous interest rate cuts, on which they had been betting for much of late 2023, might not happen after all – or at least not in the scale expected by investors.
This month's outstanding performance has come courtesy of China, with a gain of more than 9%. On the one hand, unhappy with current valuation levels, Chinese authorities are intervening in the stock market. On the other hand, new stimulus measures (lower interest rates and/or reserve ratios, amongst others) are being announced almost weekly. Hence, there is hope that the tide will turn for Chinese stocks.
Another performance worth underlining is that of Korean stocks, up almost 6% over the month. Korean authorities have been looking at how changes in corporate governance (imposed by market regulators) have helped Japanese stocks to rebound. Always keen to follow best practices, especially when they come from one of their close neighbours, the Koreans have taken note and are likely to follow a similar route to root out the famous "Korea discount"
The country is also benefiting from enthusiasm for the tech sector and the hope of a recovery in Chinese demand.
In the US, the S&P 500 surpassed the 5000-level mark and gained 5,2% over the month.
As far as bonds, it was a more mixed picture. While interest rates have fallen somewhat in China (new stimulus measures), most markets have experienced some rebound in interest rates as investors pull back from expectations of numerous interest rate cuts in 2024.
Hence, several major bond markets lost some ground over the past month, with the US dropping 1,7% and the EMU 1,4%.