Market Wrap | April

08 May 2024

Markets finally got scared

April was the first negative month in global markets since October 2023, falling 2.7% in the month.  Inflation data came in hotter than expected pushing out expectations for interest rate cuts and forcing investors and economists to start wondering whether we need to think about moving interest rates higher and even start to consider stagflation as a likely outcome.

Not to worry though, AI came to the rescue in the final week of the month (and early May). Large tech companies delivered some great results largely driven by AI powered growth.

In the below market wrap we discuss:
- US Economy continues to defy expectations, increasing fears of stagflation in the US.

- S&P500 companies continue strong despite high interest rates.

- The Japanese Yen struggles against the US dollar due to an import-dependent economy.

- Gold reached all-time highs at US$2,300 as investors look for safe haven assets.

- The Iran-Israel conflict shook up the market, spiking oil prices and leaving investors wary.

- The Bitcoin halving event halved mining rewards to 3.25 units per block and the price fell 15%.

Source: Factset: kōura returns are pre-tax and post-fees. Returns over 12 months are annualised. Past performance is not necessarily an indicator of future performance and return periods may differ.Local market returns use the relevant markets indices; NZ Equities uses NZX50 index; US Equities uses S&P500 index; Rest of World uses MSCI EAFE Index; Emerging Markets uses MSCI Emerging Markets Index, Fixed Interest uses Bloomberg Aggregate NZ Composite Bond Index. Bitcoin return is the USD change in price of Bitcoin.

1. US inflation and interest rates 

The fight against inflation took a backward step in the month. Monthly inflation readings, unemployment data and payroll data continue to come in stronger than anticipated which is resulting in nervousness around the timing and extent of interest rate cuts.

At the start of the year markets were anticipating 3-4 interest rate cuts in 2024 with the first starting in May. Now, markets are expecting only a single cut in November, though I suspect that will be pushed out.

While some market participants are starting to get nervous about the dreaded stagflation, US Federal Reserve Governor Jerome Powell continues to insist that inflation will come under control and they are not considering raising interest rates to do so.

With the revised perspective on inflation interest rates continue to climb, US 10-year treasuries have now climbed back up to the recent highs of 4.5%. This suggests that the current fed funds rate of 5.5% might not be too far away from the long-term neutral interest rate.

2. US earnings release 

The strength of the US economy is clearly being felt by companies, with Q1 earning season showing strong earnings growth. At the time of writing, over 80% of S&P500 companies have reported earnings with 77% exceeding expectations, importantly the size of the outperformance is massive, 7.5% is significantly higher than the 10-year average.

Performance of the big tech companies has been mixed, those exposed to the AI themes (Microsoft, Alphabet, Meta and Nvidia) have done extremely well while those more traditional companies have suffered (Apple and Tesla).

With all the doom and gloom about interest rates it is easy to forget that a booming economy is great for companies and can assist to drive strong earnings growth. Provided the economy holds up, we can expect to see companies continue to deliver great earnings numbers.

3. The strengthening US dollar 

US economic exceptionalism is causing the US dollar to climb to all-time highs against numerous currencies. Strong US growth and higher interest rates is driving demand for US dollars.

Typically, a strong US dollar can cause issues in emerging markets as debt is often denominated in US dollars, though this time we have not seen many of the issues of previous US dollar strengthening periods.

The one market that is hurting is the Japanese market. The Japanese yen reached a peak of 160 JPY to the USD, this compares with a long-term average of 110. Japan imports most of its energy and food and therefore this is causing a significant amount of pain for the domestic economy (weaker JPY makes all this much more expensive).

To combat this the Japanese Government are rumoured to have been intervening (purchasing JPY and selling USD) in the currency markets over the past few weeks to try and protect the Yen. Unfortunately, currency interventions very rarely work as the market ends up being far more powerful than the Governments in these things.

4. Gold 

Gold continues to climb and has reached all-time highs up at US$2,300. There is much debate about whether this is a result of everyday investors in search of safe haven assets or whether this is a bit of a bubble as China and other countries look to move out of US treasuries and into gold to avoid the prospect of US sanctions.

Data shows that the Chinese Government and companies are large buyers of gold which could be creating the short-term bubble. Like crypto, gold is a small and illiquid market so any significant changes in buying behaviour can move the prices quite significantly.

5. Iran / Israel is making investors nervous 

Political tensions in the middle east are making investors nervous again with tit-for-tat attacks between Israel and Iran. During the month oil prices spike up above US$90 for the first time since the October Hamas attacks. Prices have subsequently retrenched back to the low US$80’s.

It is an important reminder how vulnerable the economy is to a small mishap in the middle east could cause chaos to global economies. The red sea is one of the busiest shipping lanes in the world and further disruption could cause oil and shipping rates to skyrocket.

6. Bitcoin halving, though prices dropped 

Bitcoin went through its halving event on April 20th, 2024. Miners are now rewarded with only 3.25 Bitcoin for each block verified. Read more about it here.

During the month the price of Bitcoin fell 15% from its peaks down toward US$60,000. This is most probably due to the risk off sentiment that we have seen during the months. Bitcoin historically has done well when investors are feeling bullish and interest rates are falling, and unfortunately that is the opposite of what we saw in April.

Fund flows into the new ETF’s reversed for the first time this year and ver the last 4 months almost US$1.7b of money was pulled out of the ETF’s. Clearly a sign that sentiment has shifted.


Cryptocurrencies are highly volatile assets and not suitable for everyone.

Cryptocurrencies still have an uncertain future and are therefore not appropriate for all KiwiSaver members. Before investing part of your KiwiSaver balance in cryptocurrency, it is crucial that you have a clear understanding of all the associated risks:
Past performance is not a guarantee of future returns. 

Members can only allocate a maximum of 10% of their portfolio to our Carbon Neutral Cryptocurrency Fund. 

Kōura Wealth is the issuer of the koura KiwiSaver Scheme. View our PDS at   


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