- 24th November 2024
- Posted by: Dean Hall
- Categories: Market Commentary, Newsletters
I hope this update finds you well.
As expected, with Strictly Come Dancing and The Great British Bake Off back on our TV screens, it feels like the run-up to Christmas has officially started for me.
The shops are already bursting with Christmas stock, and it does seem like the festive season has kicked off earlier than usual this year.
As always with these updates, this is a look back, so it only covers events up to the end of September.
That said, how could I not mention the return of President Trump and the idea of a “Trump Rally” shaking up the markets?
Looking back at the last quarter and thinking about “The Big Picture,” the third quarter was a bit of a mixed bag for markets. Still, global equities managed to deliver gains overall.
Emerging markets stole the show, driven by China’s fresh wave of stimulus measures. Meanwhile, rate cuts from central banks gave bonds a much-needed boost.
So, how did everyone do?
United States
US shares had a decent quarter, though it wasn’t without surprises. The usual star performer, tech, didn’t shine as brightly, with information technology barely scraping a gain. On the flip side, utilities and real estate took centre stage, topping the charts.
The big headline? Interest rates (again). The Federal Reserve kept rates at a 23-year high in July but switched gears in September with a chunky 50-basis-point cut. This came after some wobbly jobs data in August, which spooked markets and raised concerns that the Fed may have delayed acting for too long.
And then there’s politics. President Biden announced he’d step aside for the 2024 election, throwing his support behind Kamala Harris. As the election season heats up, investors are already bracing for its market implications.
Eurozone
It was a decent quarter for Eurozone shares, led by strong performances in real estate, utilities, and healthcare. In contrast, energy and tech sectors lagged.
The European Central Bank (ECB) played its part, delivering a 25-basis-point rate cut in September as inflation cooled, dropping to 1.8% by the end of the quarter. However, while inflation eased, the economy didn’t exactly thrive – manufacturing, in particular, faced some tough challenges.
Meanwhile, in France, the parliamentary elections added a bit of political drama. With no outright majority, President Macron appointed Michel Barnier as the new prime minister.
United Kingdom
In the UK, stocks enjoyed a strong quarter, helped along by Labour’s landslide election victory earlier in the period. The Bank of England joined the global rate-cutting trend, reducing rates by 25 basis points in August.
Still, it wasn’t all smooth sailing. New Prime Minister Keir Starmer warned of a “painful” autumn budget, hinting at potential tax hikes and spending cuts to address a £22 billion hole in public finances. Inflation edged up slightly to 2.2%, and revised growth data added a bit of gloom to the overall picture.
Key performers included consumer staples, financials, and discretionary sectors, while the energy sector dragged its feet.
Japan
Japan’s stock market had a bit of a rollercoaster ride. It hit a fresh high in July, only to tumble in August after a surprise rate hike from the Bank of Japan. Adding to the turbulence was weak US economic data.
The yen strengthened against the dollar, which gave a boost to domestically focused sectors like retail and construction. However, exporters – think cars and machinery – took a hit. By the end of the quarter, Japanese stocks were down 4.4% in local terms.
On a brighter note, corporate earnings were solid, and real wage growth turned positive for the first time in two years. So, it wasn’t all bad news.
Asia (Ex-Japan)
Emerging Asia delivered a solid performance, with China leading the way thanks to its latest wave of stimulus measures. Thailand and Hong Kong also posted strong results, but South Korea and Taiwan struggled, both hit hard by a global tech sell-off.
China’s gains were driven by fiscal and monetary policies aimed at reversing its economic slowdown. Meanwhile, South Korea ended the quarter in the red, as doubts grew over whether AI investments would yield the expected returns.
Emerging Markets
Emerging markets outpaced their developed counterparts by a comfortable margin. China and Thailand stood out, benefiting from government stimulus and strong currencies.
On the other hand, Turkey had a rough ride, with its currency depreciating and earnings coming in weaker than expected. Brazil also faced challenges, as its central bank raised rates to combat inflation. South Korea continued to struggle, weighed down by tech sector woes.
What about bonds?
Bonds had a good quarter, largely thanks to central banks cutting rates across the board. In the US, Treasury yields fell sharply following the Fed’s 50-basis-point cut, with 2-year yields leading the way.
In the UK, gilts rallied on the back of expectations for further Bank of England rate cuts. Over in Europe, Italian and Spanish bonds outperformed their peers.
Commodities
It was a mixed picture for commodities. The S&P GSCI Index dipped, dragged down by falling energy prices as global demand softened.
Here’s how other areas fared:
- Precious metals: Gold had a stellar run.
- Agriculture: Coffee, cocoa, and sugar prices surged.
- Industrial metals: Modest gains overall, though lead underperformed
Looking ahead
As we move into Q4, here’s what to keep an eye on:
- Central banks – will the rate-cutting trend continue?
- Elections – what impact will the political shifts in the US and UK have on markets?
- China – will its stimulus efforts keep bearing fruit?
- The Santa Rally – will we see a festive boost in the markets by year-end?
By now, you should have seen our budget update. There are a few areas that will need discussion during your next review. If we think anything is urgent from the budget affects you, we’ll be in touch with you shortly.
As always, feel free to get in touch if you’ve got any questions or need assistance.