In its latest monthly market review, Exante highlights a striking divergence across global asset classes in April, raising a pressing question for investors: are markets adequately pricing in the structural risks that war and supply disruption now represent?
US equity markets delivered a strong month, with the S&P 500 gaining 9.30% month-to-date, the Nasdaq 100 surging 14.52%, the Dow Jones Industrial Average up 6.04%, and the Russell 2000 rising 8.86%.
Global bond markets saw yields climb as central bank caution persisted amid sticky inflation expectations. The US yield curve flattened by 4.4 basis points, with the spread between two- and 10-year yields narrowing to 46.9 bps, a signal Exante interprets as growing investor unease over future economic growth.
Both the Federal Reserve and the Bank of Japan held rates steady, though both flagged that rising global energy prices, exacerbated by the war with Iran, are feeding supply-side inflation risks. The dollar index fell 0.92% over the period, weighed down by falling safe-haven demand and renewed concern over US debt levels.
In the United States, Exante points to contradictory economic signals. Nonfarm payrolls rose by 178,000 in March, yet average payrolls across Q1 rose just 68,000, it said. Consumer sentiment deteriorated sharply, with the University of Michigan confidence index falling from 53.3 to 49.7. Year-ahead inflation expectations jumped from 3.8% to 4.7%, while annualised CPI rose to 3.3% in March from 2.4% in February.
The eurozone, Exante notes, is flashing stagflationary warning signs. Euro area headline inflation is expected to reach 3.0% in April, up from 2.6% in March, with consumer confidence collapsing to -20.6 points, its weakest level since early 2022.
The UK, meanwhile, shows tentative resilience. The S&P Global Flash Composite PMI rose to 52.0, with manufacturing hitting a 47-month high of 53.6. Yet private sector employment fell for the nineteenth consecutive month, business optimism is near its weakest in over two years.
For more insights, read the monthly report here.
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