The global markets fight back
As inflation starts to cool across the world, global markets had one of the strongest months of January in a long time.
It is truly amazing what a difference a few months make. A few data points can change sentiment and impact the way investors think about the markets.
Case in point, global markets were up 5.5% last month – one of the strongest months of January we’ve seen in a long time. Interestingly, the tech (and interest rate-sensitive) Nasdaq market delivered its best January of all time, lifting 11% in the month.
Data was the main driver for this rally, as it shows that inflation is starting to slow faster than anticipated, whilst economic growth is still holding up. So, a soft landing is back on the cards.
What’s more, the market rally was global and strong across the world: alongside the inflation slowdown, we’ve also seen China’s reopening continue to accelerate as well as the warmest winter on record in Europe reducing energy demand.
Meanwhile, one market that keeps confusing and confounding all investors is the crypto market. After supposedly suffering a knockout blow in 2022, crypto has returned with a vengeance. Bitcoin has delivered a staggering 40% return this year, with a number of smaller coins returning many multiples of this.
At the moment, we’re not far from being back in a bull market, with markets being up almost 20% from their October lows. That said, as we have found over the past six weeks, markets can turn on a dime, and a few pieces of economic data is all that is required to change the narrative in this highly volatile environment.
The kōura funds are impacted by currency (translation of local currency indices to NZD) and also differences in constituents between the underlying indices and the actual investments that the kōura funds invest in. kōura returns are net of tax. The kōura Carbon Neutral Crypto Currency Fund inception date was 23 May 2022. Returns over 12 months are annualised. Past performance is not necessarily an indicator of future performance and return periods may differ.
1. Inflation data continues to improve
2. Economic resilience remains stronger than anticipated
A normalisation of the Chinese industrial machine, allowing manufacturing chains to fully recover and return to normality without the threat of further lockdowns;
The recovery of Chinese consumer spending;
The growth of commodities (particularly energy) as industrial activity and travel recover; and
The restart of tourism: pre-Covid, China was one of the largest and fastest-growing outbound tourism markets in the world, and that is now expected to pick up again at full tilt.
3. A crypto resurgence
In the back end of 2022, most market commentators had called Bitcoin out for the count. And many thought that the FTX failure was the last straw to destroy all trust in the sector. Therefore, it’s been amazing to see such a strong start to the year for Bitcoin and most other crypto currencies.
On the other hand, it’s important to point out that the resurgence is based on very low trading volumes, which indicates the recent price increase may be as much a result of no sellers as a true change in sentiment.