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Stocks fall on diminishing prospects for Fed rate cuts

May 13, 2024
clock 5 MIN READ

Global developed equity markets declined in April 2024, as persistent inflation in the U.S., as well as seemingly hawkish comments from Federal Reserve (Fed) Chair Jerome Powell, exacerbated investors’ concerns that the Fed and other major central banks will delay interest-rate cuts. Monetary policy hawks have a negative view of inflation and its economic impact, and thus tend to favor higher interest rates. In contrast, emerging markets posted modest gains, benefiting from relatively strong economic growth. The Pacific ex. Japan region recorded a relatively smaller loss and was the strongest performer among developed markets in April, as Hong Kong and Singapore garnered positive returns. North America was the primary developed-market laggard due mainly to a downturn in the U.S. Europe was the top performer within emerging markets for the month, led by strength in Poland and Hungary. Conversely, Latin America was the most notable underperformer due to relative weakness in Colombia and Brazil.

Global fixed-income assets, as measured by the Bloomberg Global Aggregate Bond Index, were down 2.5% in April. High-yield bonds recorded the smallest declines for the month and led the U.S. fixed-income market, outperforming U.S. Treasury securities, corporate bonds, and mortgage-backed securities (MBS).2 Treasury yields rose for all maturities during the month, with the exception of 1- and 3-month bills. Yields on 2-, 3-, 5- and 10-year Treasury notes increased 0.45%, 0.47%, 0.51%, and 0.49%, respectively, in April. The spread between 10- and 2-year notes narrowed from –0.39% to –0.35% over the month, and the yield curve remained inverted.3 

Global commodity prices, as measured by the Bloomberg Commodity Total Return Index, rose 2.7% in April. The West Texas Intermediate (WTI) and Brent crude oil prices dipped 1.5% and 0.8%, respectively. Early-month gains amid expectations that ongoing geopolitical tensions in the Middle East would disrupt oil exports subsequently were offset by cautious optimism regarding U.S.-led negotiations for a ceasefire in the Israel-Hamas conflict. The New York Mercantile Exchange (NYMEX) natural gas price climbed 12.9% over the month amid concerns that the tensions in the Middle East could curb shipments from Qatar. The gold spot price rose 2.9% in April as the Israel-Hamas conflict prompted investors to seek “safe-haven” investments. Wheat prices rose 7.7% for the month on speculation that weather in Russia, Europe and the U.S. could lead to supply constraints.4

1All equity market performance statements are based on the MSCI ACWI Index. 

2 According to the Bloomberg US High Yield Index, the Bloomberg US Corporate Investment Grade Index, and the Bloomberg US Treasury Index. 

3 According to the U.S. Department of the Treasury. As of April 30, 2024. 

4 According to market data from The Wall Street Journal.

Glossary of Financial Terms 

  • Hawkish refers to the a policy advisor–for example, a central bank–with a negative view of inflation and its economic impact, and thus tends to favor higher interest rates. 

  • Yield is the income returned on an investment, such as the interest received from holding a security. The yield is usually expressed as an annual percentage rate based on the investment’s cost, current market value, or face value. 

  • Yield curve represents differences in yields across a range of maturities of bonds of the same issuer or credit rating (are (which is used to assess the risk of default of companies or countries). A steeper yield curve represents a greater difference between the yields. A flatter curve indicates that short- and long-term yields are closer together. 

  • An inverted yield curve occurs when short-term yields exceed long-term yields. While an inverted yield curve historically has predicted economic recessions, it is an indicator—not a forecast. 

  • The federal-funds rate is the interest rate charged to lending institutions on unsecured overnight loans. It is set by the U.S. Federal Reserve’s Federal Open Market Committee. The rate is increased when the Federal Reserve wants to discourage borrowing and slow the economy and decreased when the Federal Reserve wants to spur economic growth. 

  • Economic output comprises a quantity of goods or services produced in a specific time period. 

  • Monetary policy refers to decisions by central banks to influence the amount of money and credit in the economy by managing the level of benchmark interest rates and the purchase or sale of securities. Central banks typically make policy decisions based on their mandates to target specific levels or ranges for inflation and employment. 

  • Price/earnings (P/E) ratio is calculated by dividing the current market price of a stock by the earnings per share. Price/earnings multiples often are used to compare companies in the same industry, or to assess the historical performance of an individual company.



This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding SEI’s portfolios or any stock in particular, nor should it be construed as a recommendation to purchase or sell a security, including futures contracts. 

There are risks involved with investing, including loss of principal. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Narrowly focused investments and smaller companies typically exhibit higher volatility. Bonds and bond funds will decrease in value as interest rates rise. High-yield bonds involve greater risks of default or downgrade and are more volatile than investment-grade securities, due to the speculative nature of their investments. 

Diversification may not protect against market risk. Past performance does not guarantee future results. Index returns are for illustrative purposes only and do not represent actual portfolio performance. Index returns do not reflect any management fees, transaction costs or expenses. One cannot invest directly in an index. 

Information provided by SEI Investments Management Corporation, a wholly owned subsidiary of SEI Investments Company (SEI).

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