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Market update – April 2024

The Fed, the ECB and the BoE could all cut rates in June.

Market Update - April 2024

Rate cuts come into view

The interest rate outlook was a key driver of stock markets in 2022 and 2023 but it has been less of a dominant force this year. However, following a busy few weeks for central bank meetings, monetary policy is coming back into focus. Markets have generally reacted positively, even in response to the Bank of Japan’s first interest rate increase since 2007. Elsewhere, the talk is of interest rate cuts. In his latest press conference, Federal Reserve Chair Jerome Powell said that the US central bank was still on track to cut rates this year, while acknowledging that the latest US inflation readings had been slightly higher than expected. Some investors took this as a signal that the Fed may be moving towards a slightly more tolerant view of inflation. US equities and gold both rallied in response to his comments and held onto their gains into early April.

All eyes on June

Growth in the UK and Eurozone remains anaemic, while headline inflation continues to fall. The Bank of England and European Central Bank have therefore signalled that they are also thinking about cutting interest rates. However, both remain slightly concerned about high rates of inflation in the services sector (just above 6% in the UK), which is being driven by tight labour markets and rising wages. Policymakers in both regions have said they want to see further evidence that services inflation is on a downwards trend before starting to cut rates. Markets have concluded that that the ECB and the BoE will join the Fed in cutting interest rates over the summer, probably in June. If the three central banks do end up cutting rates at around the same time, it could provide a further boost to sentiment.

Preparing for a Trump Biden rematch

Unlike in the UK, the outcome of the next US election remains very unpredictable. The performance of the US stock market in the run up to the vote may be a useful guide, according to recent research from Schroders’ economists. Historically, when the S&P500 has risen in the 3 months before an election, the incumbent president or party has tended to be re-elected. When it falls, the incumbent has lost. This rule of thumb does not have a perfect track record, but it has proved a reliable indicator since 1980. Our economists have also introduced a new risk scenario to their outlook, reflecting the risk of US presidential candidates making unaffordable spending pledges and spooking bond markets. While this is regarded as a low-risk scenario, it is one that we are mindful of.


Our overall equity exposure is broadly in line with our long-term strategic targets. Japanese equities remain a core overweight and have boosted performance this year. We have also been increasing our US equity exposure, given the resilience of the US economy and a positive earnings outlook. With inflation stabilising and yields still at attractive levels, fixed income continues to look compelling. We prefer shorter-dated bonds, given attractive yields and continued uncertainty around the extent of interest rate cuts. We still see appeal in alternatives and have benefited from this year’s rally in gold, though we have been trimming our exposure to take advantage of opportunities in equities and fixed income. High levels of inflation in the UK have made meeting inflation-plus return targets more challenging in the near term. Despite this, we remain confident in the ability to meet inflation-plus targets over the longer term.

This article is issued by Cazenove Capital which is part of the Schroders Group and a trading name of Schroder & Co. Limited, 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. 

Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested.

This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements.

All data contained within this document is sourced from Cazenove Capital unless otherwise stated.


The value of your investments and the income received from them can fall as well as rise. You may not get back the amount you invested.