Developed market equities and fixed income came under pressure in April as stubborn US inflation data fuelled market fears that major central banks will not ease monetary policy as quickly as previously anticipated, and investors reassessed the timeframe for interest rate cuts as a result. Emerging market equities outperformed developed markets, while commodities were boosted by the resilient economic environment and the risk of escalation in the Middle East conflict.

The ‘value’ segment of the market including the UK benefited from rising energy prices and its lower interest rate sensitivity, outperforming the ‘growth’ segment such as the US technology sector. Higher commodity exposure and increased investor interest in undervalued Chinese equities supported emerging market equity indices.

The US S&P 500 Index fell during April as valuations of technology stocks came under pressure from rising bond yields. The changing interest rate environment had a negative impact on interest rate sensitive sectors such as small cap stocks and listed property. The resilient economic backdrop remains supportive to corporate earnings which have broadly exceeded expectations. The rise in inflation and strong jobs market meant investors pushed back their expected timeline for an interest rate cut from the US Federal Reserve Bank. The US 2-year Treasury yield rose to 5.0% and 10-year Treasury yields rose to 4.7% in April. The “higher-for-longer” interest rates narrative led to a stronger US dollar. An interest rate cut from the Fed in June appears unlikely and the number of cuts expected this year has fallen from around six at the start of this year, to just one or two.

European equities were also weak in April but outperformed the US. Improved growth prospects and inflation dynamics partially compensated for the headwinds of higher for longer interest rates and geopolitical risks. The weakest performing sectors were technology and consumer discretionary, while energy and property were the strongest performers. Euro sovereign bonds outperformed US Treasuries and UK Gilts (government bonds). The European Central Bank left interest rates unchanged in April. A less inflationary environment combined with the prospect of stable but slow growth in the euro area and UK, means that markets are more confident in the prospects for rate cuts from the European Central Bank and Bank of England than from the US Fed.

Performance trends broadened out beyond the technology sector in April and expectations for more persistent inflation globally benefited commodity exposed sectors/markets including the UK. The recovery in commodity prices and sterling weakness against the US dollar supported UK financials and resources. The healthcare and consumer staples sectors also produced positive returns during the month. In terms of inflation, UK headline inflation has receded however there are concerns around some core components of inflation. Domestically focussed parts of the market particularly UK mid cap equities came under pressure as a result of the implication that interest rate cuts may be delayed, however UK small caps performed well in April.

The Japanese equity market lost momentum in early April particularly large cap and semiconductor-related stocks, with heightened tensions in the Middle East negatively impacting sentiment, along with a weakening Japanese yen. There was some recovery towards the end of the month as a result of robust corporate earnings results.

Emerging market equities achieved a small positive return in April. Chinese equities recorded gains amid improved sentiment and an increase in manufacturing and infrastructure investment. However, the weakness of the Chinese economy, unresolved property crisis and high unemployment remain key concerns. India, where voting for national elections began, continued to perform strongly. Indonesia and South Korea were among the weakest performing equity markets in April amid concerns around the global economic outlook and inflation.

Persistent inflation remains a key risk across all markets, which has reinforced expectations that interest rates may remain “higher-for-longer”. While the backdrop is challenging, higher interest rates mean that bonds are now an attractive source of income. Specifically, high quality bonds with medium to slightly longer maturities can add value in a portfolio in the event of a deflationary growth shock.


Market Performance 2024 Year to Date
FTSE All-Share +6.13%
FTSE World ex-UK +6.54%
FTSE Actuaries UK Conventional Gilts All Stocks -4.48%
FTSE Actuaries UK Index-Linked All Stocks -5.37%


Total returns in GBP to 30/04/2024


Key Rates  
Bank of England Base Rate 5.25%
Inflation (Retail Price Index/Consumer Price Index)* 4.30%/3.20%


*March 2024

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.