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T&IO Weekly Market Update

5 min read 22 Mar 24

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Your update produced by our in-house experts from the M&G Treasury and Investment Office (T&IO) can be read below.

Markets have experienced another strong week, driven in part by growing confidence that monetary policy loosening is on the horizon, following a number of central bank announcements this week which struck a dovish tone with investors. 

The Federal Reserve kept their policy rates unchanged, with Chair Jerome Powell contesting that recent inflation readings above expectations had not changed the underlying story of price pressures gradually easing in the US. The Fed interestingly noted that, while their cutting cycle has not yet begun, they still expect to make three cuts to borrowing costs this year and upgraded their outlook for economic growth. Similarly, the Bank of England (who also kept interest rates unchanged this week) noted that they were moving towards the point where they can start cutting rates, with Governor Andrew Bailey suggesting two to three cuts through 2024 was a “reasonable” expectation. This announcement came after the UK’s Consumer Price Inflation (CPI) reported at 3.4% for February; a reduction from 4.0% in January and lower than the 3.5% analysts expected. The Suisse National Bank were the first Developed Market central bank to begin rate cuts this week; reducing their policy rate by 0.25% to 1.50%. 

In other data, Purchasing Manager Index (PMI)’s (a measure of financial activity) were mixed for Europe, but strong for the US and UK. US initial jobless claims were once again strong, with 210,000 filing for unemployment benefits last week, lower than expected and again showing the continued tightness in the US labour market. Lastly, UK retail sales performed better than expected, providing another boost in a positive week for UK macro-economic data.

With growing evidence of softening prices, central banks may be in a position to ease monetary policy in the second half of 2024 but employment, activity and inflation data over the next few months will be critical to the evolution of their thinking. The US economy continues to look strong, with the prospect of a soft landing more likely. However, other regions, including the Eurozone, face more challenging conditions which could lead to diverging rate cutting cycles and opportunities in relative value trades.

Please note that the below is relevant for all Prudential multi-asset funds. The tactical asset allocation comments relate to the WS Prudential Risk Managed Active and Passive ranges.

With continued disinflation traction setting the scene for the beginning of monetary policy loosening, alongside strong fundamentals in the US especially, we remain moderately overweight equities (+2.00%), funding from European IG (-1.00%) and Cash (-1.00%), having trimmed our total equity basket very slightly, into European IG this week.

*Please note that the tactical asset allocation (TAA) commentary does not apply to the PruFund range of funds. The TAA mandate is run by the Macro Investment Business (MIB) within M&G.

Equities

1 Week

YTD

1 Year

S&P 500

2.45%

10.26%

35.25%

FTSE 100

2.61%

3.55%

9.04%

Euro Stoxx 50

0.96%

11.59%

22.95%

MSCI Asia Pacific ex Japan

1.36%

2.59%

8.82%

MSCI China

0.77%

-0.46%

-11.56%

Government Bonds

1 Week

YTD

1 Year

Bloomberg Global Sovereign Index

0.51%

-1.03%

3.67%

Global Corporates

0.38%

-0.54%

4.57%

Global High Yield

0.68%

2.31%

13.66%

Asia Local Ccy Bonds

-0.06%

-1.52%

-1.86%

Source: Bloomberg as at 8:45am on 22.3.24

Information provided has been obtained from sources that M&G Treasury and Investment Office (T&IO) believes to be reliable and accurate at the time of issue but no representation or warranty is made as to its fairness, accuracy, or completeness. The views expressed herein are subject to change without notice. No person should rely on the content or act on the basis of any matter contained in this document without obtaining specific professional advice. Neither T&IO, nor any of its associates, nor any director, or employee accepts any liability for any loss arising directly or indirectly from any use of this video. Reference to the names of each asset class/company mentioned in this communication is merely for explaining the investment strategy, and should not be construed as investment advice or investment recommendation of those companies.

The value of investments and any income from them may go down as well as up and are not guaranteed. Investors may get back less than the original amount invested and past performance information is not a guide to future performance.

‘M&G Treasury & Investment Office (T&IO)’ includes the team formerly known as Prudential Portfolio Management Group (PPMG). Prudential Portfolio Management Group Limited, is registered in England and Wales, registered number 2448335.

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