SPW MarketWatch: April 2024
- Shunil Roy-Chaudhuri, Personal Finance and Investment Writer
- 02 May 2024
- 5 mins reading time
Source: FactSet, 1 May 2024. Figures are monthly price returns in local currencies for April 2024.
Middle East conflict widens
In April the tragic conflict between Israel and Hamas broadened into one between Israel and Iran. The situation remains uncertain, but we can draw some relief from the fact that Iran and Israel’s actions appear largely symbolic. This suggests a willingness among both nations to avoid significant escalation.
Even so, the Israel-Hamas conflict remains a human tragedy and the images we’ve seen on our TV screens remind us how devastating the effects of armed strife can be. It may, then, seem out of place to consider the economic and investment impact such events can have on ourselves and our families. But it is important to try to grasp their financial implications.
Steve Mann, head of investment specialists at Schroders Personal Wealth, said: ‘The oil price has not risen as sharply as we might have expected had the conflict widened further in the Middle East. But the continuing threat to shipping in the region means many vessels are having to take a longer route around the southern tip of Africa. This adds to the cost of some goods and can make it harder for central banks to reduce interest rates, which can hinder the performance of shares and bonds.’
We do, though, retain a positive view of equities (shares) as we believe there are solid economic prospects in the US and globally. But we have moved to a cautious stance on bonds as we think interest rate cuts may now happen later than investors previously expected. Bond prices often fall as investors reduce their expectations for rate cuts.
Gold keeps its lustre
Gold rose by 3.4 percent in the month and hit a record price of $2,432 per ounce on 12 April. This was driven by investor nervousness about the Middle East, concerns about continuing inflation, and the Chinese central bank’s purchases of the precious metal as an alternative to the US dollar.
We retain our positive stance on gold as demand for the precious metal remains robust. And we’ve moved to a positive stance on commodities as a whole due to a revival in demand for industrial metals, such as copper and zinc, from Chinese manufacturers.
UK shares hit record high
The index of the 100 largest UK companies closed at a record high of 8146 on 30 April (1). Many of the companies in the index earn most of their revenues from overseas and benefited from a weaker pound. And Shell and BP, two of the largest companies in the index, were boosted by a higher oil price.
But we retain a neutral stance on UK equities. We believe the UK remains set for persistently high inflation, making it hard for the Bank of England to reduce interest rates, which could dampen the prices of UK shares.
Sources:
Google (www.google.co.uk), ‘Market summary’, 1 May 2024.
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