Global Markets Update (March 2024)
Michael G Donkor CFP?
The Financial Tech Planner | I help Tech professionals maximise their income so they can focus on more fulfilling life experiences. Chartered FCSI | CERTIFIED FINANCIAL PLANNER? |
Top Highlights
US Market Summary
The S&P 500 demonstrated remarkable performance in the first quarter of 2024, boasting a substantial surge of almost +10.6% marking its most impressive start since 2019. The momentum builds upon the robust +11.7% gain observed in the final quarter of 2023.
The Dow Industrial Average saw an increase of +2.21% in March, contributing to a quarterly return of +6.14%. Meanwhile, the Nasdaq Composite experienced more modest gains, rising by +1.85%, resulting in a quarterly increase of +9.31%.
The top seven companies, which make up around 29% of the S&P 500, contributed 37% to the year-to-date (YTD) return of +10.16%. However, a new group of four companies, comprising Nvidia, Microsoft, Meta Platforms (META), and Amazon.com, totalling 18% of the S&P 500, accounted for 47% of the YTD return, overshadowing the performance of the remaining three companies. Among those, Tesla saw the largest decline, down -29.3% YTD, making it the worst-performing stock in the index, followed by Boeing at -26.0% YTD, with Apple also experiencing a decline of -10.9% YTD.
I'm bullish on US markets this month, and this is underpinned by the Fed's plan for three interest rate cuts by the end of 2024, suggesting continued support for economic growth that could improve investor confidence and keep the market moving upward.
UK Market Summary
In the first quarter of 2024, the FTSE All-Share index saw a modest increase of +3.6% since the start of the year. UK equities increased in March, led by energy, materials, and financial sectors, amid expectations of a Bank of England interest rate cut. Consumer prices rose slower to 3.4% in February, down from 4.0% in January, with core inflation also easing to 4.5% from 5.1% in January.
I expect average earnings in the UK market to continue growing, and outpacing inflation for the remainder of the year. As a result, this trend will stimulate economic activity, and contribute to market stability.
Emerging Market Summary
Asia and Emerging Markets regions saw returns of +2.2% and +2.3%, respectively, driven by a resurgence in Chinese equities buoyed by positive earnings. The MSCI China Index has surged by +12.3% since hitting a record low in January, attributed to temporary measures implemented by Chinese regulators to elevate the stock prices of domestically listed firms.
Asia/Emerging Markets currently reflect attractive valuations. Their expected EPS growth of 5% outpacing DM equities from a lower valuation base, along with a rate-cutting cycle, suggests positive gains this year.
Layoffs at Tech Companies in 2024: The Most Recent Reductions in Q1
The U.S. unemployment rate has stayed near record lows in February, yet the tech industry has encountered turbulence in the first quarter of 2024. While overall employment in the information sector showed modest growth, with a reported increase of 2,000 jobs in February compared to the previous month, the reality for many tech employees has been far from stable.
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According to data from Layoffs. FYI, a platform tracking employment trends, 49,978 tech employees have been laid off by 204 companies in the first quarter of the year. The most significant layoffs announcement came from Unity Software, a videogame software provider, which disclosed in a regulatory filing its plans to reduce its workforce by around 25%, equivalent to 1,800 positions.
For affected employees, the broader positive trends in the tech sector offer little solace when facing the prospect of job loss. Reports from companies like Ingram Micro, which quietly laid off an undisclosed number of employees, reveal a sense of uncertainty and dissatisfaction among workers. It might be worth considering investing in companies that provide services or technologies to support remote work, cybersecurity, or e-commerce, as these areas have shown resilience and growth potential amidst the current situation.
Watch out for management teams that announce layoffs as soon as their company experiences a setback, such as a temporary decline in demand for its goods and services. There are numerous examples of organisations in the financial services, retail, and real estate industries that promptly lay off staff during a downturn, but as soon as things begin to improve, they attempt to re-hire the same people—often at a higher salary. Instead, search for management teams that attempt to retain their staff by doing various activities like eliminating overtime, freezing hiring etc.
Banking Institutions Restrict Gen AI Usage Among Employees
Although many financial services leaders acknowledge the potential advantages of employing artificial intelligence to enhance efficiency and support employees, a significant portion of 30% still prohibit the use of generative AI tools such as ChatGPT within their organisation, according to a survey conducted by Arizent, the publisher of American Banker.
Approximately 20% restrict its usage to specific employees and functions. Moreover, 26% revealed that while they haven't banned generative AI yet, they are contemplating implementing such policies. When asked about plans to ease or eliminate restrictions on publicly available generative AI tools in the coming year, 39% responded negatively, while 57% expressed uncertainty. For example, JPMorgan Chase temporarily clamped down on the use of ChatGPT. One of the primary hurdles hindering bankers from embracing generative AI is the challenge of evaluating the risk associated with its application.?
As regulations evolve and attitudes shift, there's a chance for specialised AI companies to address the concerns and offer innovative solutions that meet the specific needs of financial institutions. This demand could translate into growth opportunities for investors who choose to allocate funds to these companies, especially if they can navigate the regulatory environment effectively and build trust within the industry.
Government Allocates ￡1.1 Billion to Train Thousands in Future Technologies like AI
The government allocates ￡1.1 billion to train thousands in cutting-edge technologies like AI, 6G, and quantum computing across the UK. The investment focuses on doctoral skills, with over 4,000 students benefiting from 65 Centers for Doctoral Training. This initiative spans from Edinburgh to Bristol and emphasises opportunities outside of London. Additionally, ￡60 million is allocated for quantum skills programs, including funding for PhD studentships, early career researchers, and apprenticeships. These efforts aim to drive innovation, boost economic growth, and realise the potential of AI, which could increase UK GDP by up to 10.3% by 2030.
The investment in training individuals in future technologies holds promise for the UK economy. For UK individuals, it provides opportunities to contribute to research and development projects. Moreover, projections indicate a potential increase in UK GDP to 10.3% by 2030 through the adoption of AI.
Feel free to message me directly to discuss how AI and emerging tech trends can influence your financial strategy for a successful future. Stay informed and proactive for prosperity ??.?
References
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