ATTIVO
Post-US Election – Market Summary
Recent political and economic events have significantly influenced global markets.
In the United States, Donald Trump’s election victory and Republican gains have driven the S&P 500 to record highs, though bond markets face pressure amid uncertainty over Federal Reserve policies.
In China, a $1.4 trillion fiscal package aims to stabilize slowing growth but has left investors cautious. Meanwhile, the UK has cut interest rates again, but rising mortgage costs signal ongoing inflationary concerns. These developments highlight the need for a steady, long-term investment approach amid market fluctuations.
USA insights
On November 5 2024, Americans voted in a historic election.
By November 6, Republicans, led by Donald Trump, had won all seven major swing states, regained the Senate, and unexpectedly claimed the popular vote for the first time since 2004. As of November 13, the House race was still undecided, but Republicans were close to a clean sweep.
In response to this, the S&P 500 reached a record high, surpassing 6,000 for the first time in history, driven by Trump’s promises of deregulation and corporate tax cuts. For investors with significant exposure to US stocks, this strong market performance is a positive development, as it boosts the potential for robust portfolio growth and reinforces the advantages of holding a diversified portfolio to include US equities. However, despite gains made in the stock market following the election, the bond market in the US has reacted negatively. The Benchmark 10-year treasury rate rose by up to 18 basis points the day after the election, causing bond prices to fall.
The Federal Reserve cut the base rate by 0.25% on November 7, but future rate hikes are uncertain amid inflation expectations. Speculation about Trump replacing Fed Chair Jerome Powell adds to the uncertainty, with the next Fed meeting scheduled for December 18.
China
Chinese authorities have unveiled a $1.4 trillion debt package, their biggest fiscal package in recent years to ease local government financing strains and to stabilise flagging economic growth. This is their latest effort to jump-start economic growth as they battle trade tensions and the threat of sweeping new tariffs from Donald Trump.
Investors were disappointed by the lack of measures targeting consumption and as a result, Hong Kong stocks fell on Monday 11 November.
UK
Meanwhile, in the UK, the Bank of England’s Monetary Policy Committee voted 8-1 to reduce interest rates by 0.25%, bringing the rate down to 4.75%. This marks the second rate cut of the year. However, despite the reduction, mortgage lenders are increasing their fixed rates. This is likely due to the rising cost of funding, driven by higher inflation expectations following the Labour Party’s budget and the impact of Donald Trump’s election victory.
Conclusion
Despite the short-term fluctuations driven by events such as the US elections, the UK budget, and recent changes in interest rates, it’s crucial to remember that these factors often have temporary effects on investment portfolios. While market volatility can be unsettling in the short run, long-term investing remains the most effective strategy for building wealth and navigating economic uncertainty. Focusing on a well-diversified, long-term approach ensures that you are better positioned to weather market ups and downs, ultimately benefiting from the compounding growth that comes with time. In today’s unpredictable financial landscape, maintaining a long-term perspective is more important than ever.
This article is intended for information only. It is not financial advice or a recommendation and should not be considered as such. If you choose to invest, please remember the value of investments and any income derived from them can fall as well as rise and you may get back less than you put in.