A good investment strategy goes a long way

See how our investment strategy responds to economic and financial events.

A good investment strategy goes a long way

See how our investment strategy responds to economic and financial events.

Cherry blossoms in Japan

What are the drivers behind the Japanese stock rally? Is the recent change in monetary policy possibly throwing a spanner in the works? And is Japan benefiting from the trade war between China and the West? Mark Van Assche, Private Banking and Wealth Office account manager, talks about it with Romain Dédericks, Portfolio Manager at KBC Asset Management. 

28-03-2024

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What’s happening in the world? And what are the implications for the financial markets? 

Update April 4, 2024

Economy

  • Economic data points in the manufacturing industry and the service sector seem to be gradually stabilising, including in Europe.
  • The US economy remains robust due to continued low unemployment and strong consumer spending. As a result, economic growth in the US continues to do surprisingly well.

Comodity prices - inflation

  • In both the US and Europe, the inflation trend is still on the downside. 
  • Persistent underlying inflation (especially in the services sector) and recently rising oil prices mean that the disinflation process is proceeding somewhat more slowly than previously thought.

Fiscal and monetary policy

  • The exceptional stimulus programmes are being scaled back, but there is no sign of savings drift. Programmes such as EU Next Generation and the Inflation Reduction Act in the US are still substantial and continue to offer considerable support. China is also stimulating its flagging economy. 
  • Central banks in the US and Europe have raised key rates at an unprecedented pace in an effort to slow growth and cool inflation.
  • In their recent communications, the bankers confirm that the disinflation process is still on track, but that confirmation is needed before cutting the policy rate. The market is pricing in a first fall in the policy rate in June.

Bond markets

  • Interest rates appear to have peaked. 
  • However, a range of inflation data (especially in the US) and higher oil prices cast doubt on the timing and magnitude of the expected cut in policy rates. As a result, we still see interest rates making occasional bucks.

Equity markets

  • Sentiment is positive for the asset class.
  • While the outlook for company results in 2024 may be slightly overly positive, the market doesn’t seem to be particularly worried about it for now. 
  • The results for the fourth quarter show profits growing at almost 8% in the US, unlike profits in the euro area which contracted by more than 12%. Despite the noticeable difference, the market had already factored this into their forecasts. In terms of the profit trend, both regions have surprised in the positive sense.

Risks

  • Oil prices are particularly volatile but remain below the recent peak of September 2023.
  • This is fuelling the current prevailing expectation of lower inflation. However, the conflict in the Middle East may continue to cause nervousness. 
  • Not an easy environment, therefore, for policymakers to take decisions on interest rates.
  • The US elections could also give rise to volatility later this year.

First-quarter corporate results are just around the corner. Meanwhile, oil prices continue to rise, and long-term interest rates are also rebounding in the U.S.

Siegfried top, Senior Investment Strategist KBC Asset Management

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