We ended March questioning whether the great start to the year would be sustainable going forward or if we would see a respite for stocks during the second quarter of the year; the month of April has made the picture clear. Economic variables pointing to a more complex outlook, as well as new tensions in the Middle East, returned nervousness to the markets and put Q1 corporate reports on the back burner. Both equity and debt markets suffered widespread declines during the month.

On the economic side, higher than expected readings for inflation, as well as a slower convergence speed towards the 2% inflation target have again postponed rate cuts. We started the year expecting six rate cuts of 25bp each by 2024; by March the expectation had been adjusted to three; finally, today futures markets are pointing to only one cut during the year, occurring in September.

In addition to the above, during April, we learned about the preliminary U.S. gross domestic product data for the 1st quarter. The 1.6% quarter-over-quarter annualized growth disappointed markets and raised concerns of falling into a low-growth scenario with inflation, or stagflation. However, a closer look at the data and stripping out volatile components such as trade and inventories reveals a still resilient consumer driven by a robust labor market.

And while volatility was present in the financial markets during the month, in the geopolitical spectrum we did not lag behind; on April 14 Iran launched an offensive with more than 300 drones against Israel in retaliation for the latter's attack on the Iranian consulate days earlier in Damascus, Syria. Also, on April 19, Israel responded with a limited strike on certain targets in Iran. The attacks were categorized as demonstrations of power without major consequences, however, the situation in the Middle East still poses a latent risk to the world's economies.

Finally, on a positive note, U.S. companies' first quarter corporate reports have met and exceeded expectations. With almost half of the companies having reported, 77% of them have presented better than expected numbers in earnings and 60% in sales. This maintains the 3.5% expected earnings growth for the first quarter of the year and a healthy 10.8% for the rest of 2024. Likewise, GOOGLE, MICROSOFT and META's reports were positive, but not TESLA's, which has faced greater challenges in its production and profitability.