October 2024 Market Summary

As the UK Autumn Budget announcement approaches, certain changes such as taxation, public spending and economic policy could impact investment portfolios.

This uncertainty underscores the importance of maintaining a diversified portfolio, which can help mitigate risks by spreading exposure across various asset classes, sectors, and geographic regions. By doing so, investors can better navigate market fluctuations and safeguard their investments against unforeseen shifts.

Market performance overview

Over the past year, global markets have performed well and are up higher than they were previously. The performance of several of the top indices for the previous 12 months are as follows:

• FTSE 100: +10.75%
• S&P 500: +34.6%
• Europe’s STOXX 600: +12.54%
• Japan’s Nikkei 225: +12.14

UK and US insights

In the UK up to August 2024, inflation has remained stable at 2.2%, just above the Bank of England’s target of 2%. The Governor of the Bank of England, Andrew Bailey, has suggested that if inflation continues to maintain level, the UK can expect more ‘aggressive’ interest rate cuts in the future.

On 30th October, Chancellor Rachel Reeves will announce the first Labour Budget since the election earlier this summer. Whilst Reeves has hinted at having to make ‘tough decisions’, she remained optimistic about the prospects of the UK during the Labour party conference. Attivo will be providing updates and key information to our clients leading up to, and following, the announcement.

In the US this month, the Federal Reserve announced a bigger-than-expected interest rate cut of 0.5%, bringing the key lending rate in the States to between 4.75% and 5%. This is due to the US Labour market remaining in a strong position in September, together with the inflation rate falling to 2.5%, the lowest rate since February 2021.

As interest rates are falling in the UK and US, analysts believe that bond prices should start to rise, providing an opportunity for capital returns on bonds in 2025.

Other economic developments

Last week, the People’s Bank of China announced a £213 billion bond package, designed to help support slumps in the economy including the property and financial sector. This follows disappointing data from China that suggests the economy may not reach its target of 5% growth in GDP in 2024. However, economists are questioning whether this measure on its own will be enough.

At the beginning of October, Japan appointed a new Prime Minister, Shigeru Ishiba. In his first few days of office, Ishiba pledged to maintain the strong relationship with the United States, and also to tackle the slowing economy. After years of negative interest rates, the Japanese central bank’s interest rates remain low at 0.25%, and the Prime Minister has indicated that there would not be any increases to this in 2024.

In Europe, the inflation rate in the Eurozone fell year on year to 1.8% in August, with falling oil prices cited to be the reason for decrease. This sees the first time that inflation has been below its target of 2% in 3 years. Whilst services in the Eurozone have remained strong, the effects of high inflation have left wage inflation stagnant and disrupted manufacturing. Investors are now expecting further interest rates cuts this year in attempt to help these industries regain their momentum.