Capital IdeasTM

Investment insights from Capital Group

World Markets Review
Markets rally despite bank scare: Q1 roundup

Global stocks rose as investors welcomed signs from central bank officials in the U.S. and Europe that interest rates may not rise as much as previously expected. Lower inflation levels, combined with a crisis in the banking sector, prompted central bankers to consider adjusting monetary policy in the months ahead, leaving investors to speculate that there may be no additional rate increases this year.

Information technology stocks rallied, including many of the same companies that lost significant market value as the U.S. Federal Reserve (Fed), the European Central Bank (ECB) and others aggressively hiked rates in 2022 and early 2023. Stocks in the communication services sector also rose sharply as investors recalculated the perceived value of fast-growing companies in a potentially lower-rate environment.

Bond markets advanced as investors adjusted rate expectations going forward, suggesting that many see rate cuts coming before the end of the year. Fed and ECB officials continued to raise rates in March, but they made significant adjustments to the language and tone in their most recent monetary policy statements alluding to the impact of the banking crisis.

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