The first quarter of 2024 was marked by strong share price growth. While market participants’ expectations for a rapid rate cut have moderated, better-than-expected economic indicators and corporate performance in Q4 significantly increased the likelihood of a “soft landing” scenario in the world’s leading economy, the US. While almost all sectors had a good start to the year, investors’ optimism about the rapid development of the use of artificial intelligence was particularly favorable for the technology sector, which grew by more than 15% in the quarter.
The rhetoric of the US Federal Reserve and the European Central Bank has remained largely unchanged in recent months. Central bankers have stressed that, although inflation has been declining recently, it is still above the target of 2%. January inflation was 3.1% in the US and 2.6% in Europe. The historically low unemployment rate and other positive economic indicators indicated that the economy remains strong without the additional stimulus of falling interest rates. As a result of these central bank comments, the market became significantly more conservative in its assessment of the likelihood of a rate cut in the next few months, while long-term risk-free government yields climbed higher. Highly rated bonds became cheaper, and their yields rose as central bank rate cuts were delayed. Riskier and lower-rated bonds appreciated on the back of good economic indicators.
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