Overview: Please see the SWU Online Invest IC Portfolio Updates – April 2024:
Ending the 2023-year, growth in China was 5.2% beating government growth expectations. The rebound and improvement comes as a reprieve from China’s exit of its pandemic era policies.
The China Securities Regulatory Commission (CSRC) has implemented significant changes, introducing new policies for the equity market to assist in the safeguarding of operations within the Chinese capital markets. Recent example of China’s tightening regulation is Lingjun investment, a hedge fund quantitative trading company being dealt a three-day ban from trading. Breaking rules on orderly trading, orders from Lingjun to dump stocks rapidly declined the benchmark indexes. The stock exchanges of key financial hubs Shanghai and Shenzhen issued they will deepen their scrutiny of market trades conducted by quant funds which use advanced computer-driven automated analysis and algorithms to catch opportunities in stocks and commodities especially of leveraged quantitative products, costing financial and social stability as a result.
Fundamentally, the US economy is still progressing steadily having no clear signs of moving drastically in either direction yet. Note that stripping out the magnificent 7, the US markets are shown to be neither overly expensive nor cheap, with modest corporate earnings growth. Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla lived up their magnificent 7 name, with big gains in 2023. Due to their huge size in the market a disproportionate influence weighed on the Nasdaq composition and S&P 500 indexes.
Source: Morningstar
Data as at 26 January 2024
Globally, the world is also experiencing an interesting period of potential political landscape changes. 40% of the world will be in an election year with all eyes on the biggest market, the United States. Trumps’ possible rise to power will be a significant signal to international markets in the following years. Expect continuations from his first term in office as a return to adversarial trade wars which could continue maintain inflation issues.
Inflationary issues have plagued 2023 continuing the reality of cost-of-living crisis for many. With inflation persisting to 2024 and slow reactions to temper it, expectations for multiple rate cuts have decreased. Especially in the event of Trump coming back into office, interest rate drops may be held off. With this the IC doesn’t expect many material rate cuts for calendar 2024 and may seek to minimise allocation to bonds to reflect this.
Additionally, outcomes to Russia/Ukraine and unrest in Middle East remain to be a question with no definitive answer. The potential of other countries involving themselves in the Middle East would escalate the conflict, which could result in higher oil prices, causing both interest rates and inflation to remain elevated. If this possibility goes through there would be large negative shocks to the stock market with consumer confidence acting more skittish than even now.
Portfolio Update
| Portfolio | 1-month | 3-month | 6-month | 1-year |
|---|---|---|---|---|
| Performance | 5.17% | 3.69% | 1.02% | -1.32% |
Data as 29 February 2024
The IC has decided to maintain the portfolio, as it is in line with China’s ongoing recovery.
