The global economy appears resilient despite higher interest rates in the US, UK and Europe. This has provided support to developed market equities which delivered positive returns in April, with value stocks such as the energy sector, which feature prominently in UK and European equity indices, modestly outperforming growth stocks such as technology companies within the US S&P 500 Index. The technology sector has performed well so far this year with the Nasdaq Index +21% in US dollar terms to the end of April, however this has been diluted by a stronger pound. Emerging market equities underperformed during the month given the weakness in Chinese equities largely due to escalating geopolitical tensions with the US, despite an economic rebound driven by the post-pandemic reopening. Global bonds, primarily investment grade corporate bonds, recorded gains in April.

Energy prices have declined in spite of OPEC announcing a cut in production aimed at stabilising oil prices. This recently resulted in lower headline inflation figures in the major developed economies particularly on the back of high prices in 2022, however in the UK the energy price cap may cause a lagged effect on inflation in the coming months.

The US economy continues to be supported by acceleration in the manufacturing and services sectors, however renewed turmoil in the banking sector following the closure of another US financial institution at the end of April has heightened fears of a slowdown and possible recession. Indicators suggest however that US inflation is starting to moderate and the labour market is cooling. US interest rates were increased by a further 0.25% in May to the 5.00% – 5.25% range, as expected by financial markets, however markets are anticipating further rate rises may be needed to counter concerns that the decline in inflation has stalled. Returns from US equities were positive yet behind their developed market peers in April.

UK economic data has also proved more resilient than anticipated, supported by growth in the services sectors whilst the manufacturing sector contracted further. The UK is trailing other major economies in its attempt to curb the pace of price rises due to the sharp increase in energy and food prices, exacerbated by sustained wage growth pressures and labour market shortages. As a result, yields moved higher and UK government bonds (gilts) posted negative returns in April, giving up most of the gains realised earlier in the year. UK equities were the best performing developed market in April driven by the exposure to global value stocks in the FTSE All Share Index, with small and mid-caps rising as well. The strength of the UK economy has also contributed to an improvement in sentiment.

Economic sentiment in the Eurozone was steady in April and saw greater optimism in the consumer, retail and services sectors. European equities delivered further gains in April as a result, making it the strongest performing equity market so far this year despite the significant headwinds which arose last year including the energy shock, Ukraine crisis, as well as rising inflation and recession risks. With core inflation in the Eurozone moving higher and ongoing wage pressures, markets are expecting further interest rate hikes from the European Central Bank.

Japan’s equity market achieved gains in April, supported by very low interest rates and the Bank of Japan’s commitment to maintain easy monetary policy. The yen weakened and yields on long dated Japanese government bonds declined as a result.

Emerging market equities produced negative returns in April where weakness in China was the main contributor and partially offset by positive returns achieved by markets outside of Asia such as Latin American and India. Tensions between the US and China have been growing for several years but the relationship has become particularly strained recently. Concerns around rising geopolitical tensions impacted Chinese equities, notably the communication services and consumer discretionary sectors as a result of US investment regulations.

Equity markets have now broadly recovered from their lows experienced in March this year where banking sector issues in the US and Europe caused volatility and a risk-off sentiment, however this has been isolated. The impact of monetary policy tightening may continue to filter through to developed economies which may result in further challenges, however stronger than expected economic data and generally positive corporate earings data has aided the recovery seen in equity markets in the shorter term. A combination of tighter monetary policy and weakened credit markets could result in slower growth in the coming months, meaning that the threat of  recession remains.


Market Performance 2023 Year to Date
FTSE All-Share +6.53%
FTSE World ex-UK +4.76%
FTSE Actuaries UK Conventional Gilts All Stocks +0.35%
FTSE Actuaries UK Index-Linked All Stocks +0.24%


Total returns in GBP to 28/04/2023


Key Rates  
Bank of England Base Rate 4.25%
Inflation (Retail Price Index/Consumer Price Index)* 13.50%/10.10%


*March 2023

Source of data: FE Analytics,,

The content contained in this article represents the opinions of MacIntosh & James Partners Ltd. The commentary in no way constitutes a solicitation of investment advice and should not be relied upon in making investment decisions. Past performance is not a reliable indicator of future results. The value of your investments can fall as well as rise and are not guaranteed.