Market development – Q2 2024

11.07.2024

In Q2, global equities continued on the upward trajectory that also affected Q1.
However, we did see a bump in the road, as global equities slumped in April, breaking the streak of several positive months. April was affected by rising yields, which put the equity markets under pressure.
Yields rose due to higher-than-anticipated inflation in the US, coming in well above the US central bank’s (FED) 2% inflation target. This lowered market bets on how soon and how rapidly the FED will be cutting rates.
Subsequently, yields stabilised again, on new signs of lower US inflation and, most recently, slighter weaker growth numbers for the US economy. Furthermore, the European Central Bank (ECB) and the central bank of Denmark, Danmarks Nationalbank, cut their policy rates in June.
The trend of lower yields and reasonable earnings reports coming out in May and June caused renewed optimism in the stock market, resulting in several new all-time highs. On the surface, this indicates a very robust stock market, and new all-time highs always a strong signal in and of itself is. However, looking underneath the surface, the equity market is still led by the most valuable companies (also called the Magnificent 7).

Figure 1: Development of equities and bonds