Market Updates

In the latest tit-for-tat exchange, Israel struck Iran last Friday in response to Iran’s strike on Israel the previous week. It’s possible that Israel’s limited response could end the round of direct clashes between the two countries, at least for the time being, given that both countries have described their actions as a specific operation in response to the actions from the other (the very definition of tit-for-tat), rather than as an attempt to escalate more generally.

The release of the March US consumer inflation data, which was hotter than expected, lead markets to rethink when the US Federal Reserve (Fed) would start cutting rates. Markets now expect the Fed will cut rates later and only twice this year.

Major equity indices fell last week, likely concerned by escalating tensions in the Middle East, which pushed oil prices above 90 US dollars per barrel for the first time since October 2023.

After eight years in negative territory, the Bank of Japan (BoJ) lifted its key policy rate to 0-0.1% last week. It was an important move but widely expected, so markets carried on as usual.

Equity indices from the US to Japan and through Europe continue to make record highs week after week. Last week was no different, although some indices closed flat such as the US S&P 500. There’s a structural element to this rally, which we carry in our portfolios.

It wasn’t obvious from the solid figures on job growth, but we’ve got more signs that the US labour market is indeed cooling. The unemployment rate rose to 3.9%, the highest reading since January 2022, while wage growth, job openings, and job quits slowed. This combination of data supported markets.