At a glance:

  • Economic Overview: Global growth is improving but low; US growth is slowing, and inflation remains high.
  • Market Performance: FTSE World Equity Index is up +8% YTD in euros. US dollar is up +2% vs. Euro. Commodities, especially crude oil (+19%), agricultural (+23%), and industrial metals (+15%), are performing well.
  • Investment Strategy: Bonds are weak as inflation hedges. Commodities outperform during stagflation.
  • Market Outlook: Expect more volatility due to the US presidential election. Continue the bull market but be cautious, possibly follow “Sell in May, go away” advice.

We have a macro environment of low but improving growth internationally, initial signs of slowing growth in the US, and inflation rates that remain stubbornly high everywhere.

Despite the stock market correction in April, the FTSE World Equity Index has shrugged off the rising risks of stagflation and rallied +8% year-to-date in euro terms. Bonds, a poor inflation hedge, continue to struggle. The US dollar has added +2% versus the Euro while commodity prices have performed well in recent months. Commodities have historically outperformed equities and bonds during stagflationary periods. West Texas Intermediate crude oil has rallied +19% in the first four months of 2024. Agricultural and soft commodities have added +23% and industrial metals have gained +15%. We expect stock market volatility to pick up in the second half of the year as the US presidential election comes into focus.

The bull market in equities may continue, though it is prudent to be vigilant and prepared for market nervousness until later in the year. “Sell in May, go away, and come back on St. Ledger’s Day”, is sage advice as we navigate the months ahead.