“Peace cannot be kept by force. It can only be achieved by understanding.” Albert Einstein (1879-1955)

https://www.thefactsite.com/year/2024/ reminds us that time seems to pass faster than ever; we seem to be well informed – Putin won the election, Sweden as a historical neutral country marked full NATO membership, etc. – but the global confusion continues. 

Against many odds, in the economy the US is currently undergoing a bull market. The success story of NVIDIA’s chips, which utilize artificial intelligence, has enabled the S&P 500 to achieve record highs. In politics, the dominant story of this year has been the various presidential elections. 

India’s GDP growth is expected to reach 6.4% in 2024 and will hit 7% in 2026.On the other hand, China’s growth is expected to come in at 5.4% next year. 

There is a template. Following reforms in the late 1970s that opened its economy to the world, China’s growth averaged 10% a year for three decades. That made it a magnet for foreign capital and gave it greater clout on the world stage. Every big global company had to have a China strategy. 

But the so-called ‘miracle’ phase of China’s expansion is now in the past as a property crisis intersects with growing Western concerns over its dominance of supply chains and advances in sensitive technologies. 

That’s where India comes in. Modi’s government is seeking to make the Indian economy more competitive, a shift that’s appealing to Western businesses looking to diversify away from China in search of a deep well of cheap labor. Modi has made India’s accelerating economy a major part of his election pitch, pledging at a rally last year to lift the country’s economy to the top position in the world should he win a third term. 

So far, the war in Ukraine, intensifying great-power competition and the residual impacts of the Covid-19 pandemic have been the major themes underpinning the global risk environment. But with hostilities now escalating in the Middle East, it is clear the world is in an extended period of heightened volatility. 

https://www.rabobank.com/knowledge/d011397372-from-ukraine-war-to-middle-east-war-another-huge-blow-to-global-stability – the authors of this article reflect the issue of escalation in the Middle East very well. 

After Dubai was flooded following heavy rainfall, social media immediately linked “cloud seeding”, the manipulation of existing clouds to cause rain, to the unprecedented precipitation. But experts say the record rainfall was likely caused by climate change. So where does the truth lie? Artificial intelligence producing artificial rain? No. This technology dates back to 1940 and is used for various purposes, but it raises the ethical question of up to what point humanity should actively use geo-engineering or where the limits of control lie, also considering that weather modification takes place in the air, where there are no boundaries. 

In view of the current drought, Morocco is considering using cloud seeding technology to produce artificial rain. The country has been trying to increase rainfall through the Al-Ghaith program, a collaboration with the US Agency for International Development, since the 1980s. The latest region to join the trend is China. The longest heat wave in decades and the depletion of water resources, including the Yangtze River, which has reached its lowest level in recent years, have led the Asian giant to propose such a solution. https://en.wikipedia.org/wiki/Cloud_seeding 

 

Market environment 

Equity investments once again reached new all-time highs and continued to lead the performance rankings in the first quarter. Growth expectations for the economy were raised due to a better-than-expected development of the global economy. On the other hand, inflation expectations have also risen continuously since the beginning of the year. Nevertheless, an initial interest rate cut is still priced in for the coming months and further adjustments are expected by the end of the year. By contrast, yields on fixed-income investments increased across all maturities. 

The positive price trend on the equity markets continued, although earnings expectations were not increased following the reporting season, meaning that the price increase is essentially based on higher valuation. 

The bond markets ended the first quarter with negative returns. The first interest rate cuts by central banks have been postponed to the summer and the extent of the reductions had to be adjusted downwards. Long-term inflation expectations rose continuously from 2% to 2.5% over the course of the first quarter. Accordingly, the central banks will tend to take a wait-and-see approach and continue their restrictive monetary policy. 

In terms of economic development, a slowdown is expected in the current year. However, expectations of growth rates in America have been increased substantially and now stand at 2.1% compared to 1.6% at the beginning of the year. In Europe, on the other hand, growth is expected to slow to +0.5%. Given the stabilized expectations in China and higher growth in India, the global economy can be expected to develop positively overall. By contrast, the yield curve has remained inverted, but has flattened since the beginning of the year. 

Following the strong first quarter on the stock markets, analysts raised their price targets. Various surveys point to very optimistic market sentiment and corresponding investor positioning, which calls for caution. 

All performance data is updated on our portfolio valuation platform https://t1p.de/sz63j

Please do not hesitate to contact us for further information. 

Kind regards 

Your JACOT Partners Financial Services Ltd 

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