Economic and Market Overview
Q1 2024 proved to be another good quarter for financial markets as investors continued to be somewhat optimistic. The prevailing investor confidence mainly relies on three key factors: resilient economies and corporate profits, optimism on the AI hype, and expectations that interest rates will start taking downward trajectory in the near future. Inflation rates are moderating, and rates are peaked, both factors indicate central bankers will pivot in coming months to bring rates down. However, resilient economic growth and sticky inflation could lead to the possibility of interest rates and bond yields staying higher for longer than the markets are pricing in, which is a tail risk for the financial markets. During the first quarter, all key central banks including the Federal Reserve, the Bank of England and ECB kept interest rates steady.
Looking at the performance of major asset classes over the course of Q1 2024, equity markets continued strongly on the positive momentum set by the last quarter of 2023 amid falling inflation levels in all major economies and the signals from central banks that interest rates will start falling sometime in 2024. Japan’s Nikkei 225 surprised international investors with another stellar quarter that surged another 20% in Q1 of 2024 at the backdrop of corporate reforms and world’s greatest investor Warren Buffet’s increased confidence on Japanese’ companies. S&P 500 index was the second best performing equity market with 10.6% quarterly return followed by Europe’s Euronext 100 and DJ Islamic markets index with 9.4% and 8.3%, respectively. The UK FTSE 100 returned only 4%, impacted by fears of recession as UK economy entered technical recession in the last quarter of 2023. China’s Shanghai Index increased only 2.2% after a negative performance in the previous quarter amid slow growth and troubling property sector despite Beijing’s efforts to stimulate the economy through monetary easing. DJ sukuk index closed the quarter flat as yields increased again after falling in the previous quarter. Commodities’ markets also rewarded investors with good returns where oil rose by 12.9%, gold surged by 8.2%, and DJ Commodity Index increased by 3.3% in the first quarter of 2024 amid delays in interest rate cutting cycle. Lastly, UK pound fell against US dollar by roughly 1% in the first quarter of 2024.
Portfolio Commentary
During the first quarter of the year, all our portfolios performed positively. The rise in equity markets and commodities (gold and silver) were the key drivers of performance, whilst the performance of sukuks remained stagnant. Progressive Growth portfolio was the best performing portfolio with an uplift of 6.9% during quarter.
Performance of Simply Ethical Online Portfolios in Q1 (01 Jan 2024 – 31 March 2024)
During the quarter, there were no changes made to the investment allocation for any portfolios. Given our cautious view on equity markets, we continue to maintain a relatively higher sukuk allocation particularly for Balanced Growth, Growth and Progressive Growth portfolios. As your active investment manager, we remain vigilant on prevailing risks and continue to manage risks and adjust portfolios where appropriate.
To learn more about our investment approach and how we can help you, book a free initial consultation with one of our Financial Advisers.
Disclaimer
Data as of 31 March 2024. This article is for information only. Please do not act based on anything you might read in this article. Past performance is not a reliable indicator of current or future returns. This article contains general information only and does not consider individual objectives, taxation position or financial needs. Nor does this constitute a recommendation of the suitability of any investment strategy for a particular investor. It is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any trading strategy to any person in any jurisdiction in which such an offer or solicitation is not authorised or to any person to whom it would be unlawful to market such an offer or solicitation.
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