Stocks fell for the first month in six in April as US inflation data stoked investors’ concerns that interest rates in the world’s largest economy may not drop this year.
The STOXX® Global 1800 index lost 3.7% last month when measured in dollars and including dividends[1], paring its 2024 gain to 4.9%. The STOXX® World AC index fell 3.1% in the month.
The Eurozone’s EURO STOXX 50® dropped 2.2% in euros, while the pan-European STOXX® Europe 600 retreated 0.8%[2]. The STOXX® North America 600 fell 4.3% in dollars, as did the STOXX® USA 500. The STOXX® Asia/Pacific 600 fell 3.4% in dollars. The STOXX® Developed World shed 3.6% and the STOXX® Emerging Markets gained 0.9%.
Figure 1: STOXX Benchmark indices’ April risk and return
Figure 2: STOXX Equity World indices’ April risk and return
Germany’s DAX® fell 3% in the month. MDAX®, which gauges the performance of German mid-caps, decreased 2.9%.
| For a complete review of all indices’ performance last month, visit our April index newsletter. |
Rate cuts on hold?
The March Consumer Price Index showed US inflation is running at an annual 3.5%, faster than the 3.2% increase a month earlier, and the third straight month where the figure was stronger than expected. Speaking a few days after the report, Federal Reserve Chair Jerome Powell said central bankers aren’t seeing the type of data that would merit lower interest rates this year.[3]
Figure 3: Total annual % returns for STOXX World AC index
Figure 4: Select STOXX benchmarks’ returns since 2023
Volatility rises
The EURO STOXX 50® Volatility (VSTOXX®), which tracks EURO STOXX 50 options prices, rose to 15.6 at the end of last month from 13.4 in March. A higher VSTOXX reading suggests investors are paying up for puts that offer insurance against stock price drops. The VDAX-New®, which measures volatility in German equities, climbed to 14.6 from 12.8 in March.
Factor investing
Factor portfolios struggled during the month, with only two of the strategies tracked by the STOXX Factor indices — Low Risk and Value — outperforming the broader market (Figure 5). Quality was the worst-performing signal.
Figure 5: STOXX Factor (Global) indices’ April risk and return characteristics
Climate benchmarks
Among climate benchmarks, the STOXX® Global 1800 Paris-Aligned Benchmark (PAB) declined 4.4%, as did the STOXX® Global 1800 Climate Transition Benchmark (CTB). The PAB and CTB indices follow the requirements outlined by the European Commission’s climate benchmarks regulation.
Sustainability indices
The STOXX® Global 1800 ESG-X index fell 4% in the month. The STOXX® ESG-X indices are versions of traditional, market-capitalization-weighted benchmarks that observe standard responsible exclusions.
Within indices that combine exclusions and best-in-class ESG integration, the EURO STOXX 50® ESG index dropped 1.2%. Germany’s DAX® 50 ESG index (-2.3%)[4], which excludes companies involved in controversial activities and integrates ESG scoring into stock selection, outperformed the benchmark DAX’s return in the month.
The STOXX® Global 1800 SRI lost 3.8%. The STOXX SRI indices apply a rigorous set of carbon emission intensity, compliance and involvement screens, and track the best ESG performers in each industry group within a selection of STOXX benchmarks.
Finally, the DAX® ESG Screened slid 2.6% in the month. The index reflects the composition of the DAX benchmark minus companies that fail to pass norms-based and controversial weapons screenings, meet minimum ESG ratings or are involved in certain business activities considered undesirable from a responsible investing perspective.
Thematics, dividend strategies
Only four of 35 STOXX® Thematic indices outperformed the benchmark STOXX Global 1800 last month. The STOXX® Global Copper and Metals Mining (+9.6%) and STOXX® Global Copper Miners (+9.7%) indices were alone in posting gains.
Dividend strategies outperformed in April, with some posting positive returns. The STOXX® Global Maximum Dividend 40 (+0.6% on a net basis) selects only the highest-dividend-yielding stocks. The STOXX® Global Select Dividend 100 (+0.1%) tracks companies with sizeable dividends but also applies a quality filter such as a history of stable payments.
Minimum variance
Minimum variance strategies beat the benchmarks’ returns last month. The STOXX® Global 1800 Minimum Variance lost 3.3% and the STOXX® Global 1800 Minimum Variance Unconstrained dropped 1.8%.
The STOXX Minimum Variance Indices come in two versions. A constrained version has similar exposure to its market-capitalization-weighted benchmark but with lower risk. The unconstrained version, on the other hand, has more freedom to fulfill its minimum variance mandate within the same universe of stocks.
[1] All results are total returns before taxes unless specified.
[2] Throughout the article, all European indices are quoted in euros, while global, North America, US, Japan and Asia/Pacific indices are in US dollars.
[3] WSJ, “Powell Dials Back Expectations on Rate Cuts,” April 16. 2024.
[4] Figures in parentheses show last month’s gross returns.