After a powerful run from q4 2023, equities paused in April, with many of the momentum stocks simply running out of, well, momentum and leading many to revisit the old adage of 'Sell in May'. Meanwhile, sentiment in the bond markets soured further as the prospect of rate cuts receded - although we remain of the view that the main purpose of rate cuts now is to ensure the stability of bond markets themselves. The best performance once again came from China and Hong Kong as these markets start a (long delayed) catch up as distressed sellers are cleared from the markets. Markets are generally trying to establish some trading ranges for the summer months and while foreign policy is increasingly bellicose as led by politicians facing re-election as well as the defence and energy sector lobbyists, western trade lobbyists are also hard at work, erecting tariff barriers and trying to co-opt third parties to do the same. While this is not good for their own consumers, it is also fighting the reality of high quality, much cheaper, products coming from Asian competitors, most of whom are not also facing high energy costs. Nor is a strong dollar helping. As such, many of the big global companies are facing serious competition in third party markets and investors, also looking to diversify portfolios, are starting to look at their overseas competitors.

The rally in asset markets in Q4 has evolved into a new bull market for equities, but not for bonds, which remain in a bear phase, facing problems with both demand and supply. As such the greatest short term uncertainty and medium term risk for asset prices remains another mishap in the fixed income markets, similar to the funding crisis of last September or the distressed selling feedback loop of SVB last March. US monetary authorities are monitoring this closely. Meanwhile, politics is likely to cloud the narrative over the next few quarters with the prospect of some changes to both energy policy and foreign policy having knock on implications for markets/