Monthly Comment - September 2024

September 2024

September 2024 saw significant movements across global financial markets, with

various asset classes responding to economic data, central bank decisions, and

geopolitical events.

‍

Equities

Global equity markets demonstrated resilience in September, with the MSCI World

Index rising by 2.3% in USD terms. This positive performance was driven by

several factors across different regions. In the United States, the S&P 500

continued its upward trajectory, gaining 2.1% and reaching new all-time highs. The

tech-heavy Nasdaq also performed well, buoyed by better-than-expected earnings

reports from major technology companies. European markets showed mixed

results. While the overall European market struggled, falling by 0.5%, individual

countries saw varying performances. Germany's DAX index gained 2.8%, and

France's CAC 40 rose 3.2%. These gains were largely attributed to the positive

impact of China's stimulus measures on European exporters, particularly luxury

goods and automotive manufacturers. Japan's Nikkei 225 advanced 3.2%,

benefiting from the Bank of Japan's cautious approach to further rate hikes.

However, the market experienced volatility early in the month, with a significant

drop following an unexpected rate hike by the Bank of Japan. The standout

performer in Asia was Hong Kong's Hang Seng index, which surged 9.1%

following the announcement of a major stimulus package by the Chinese

government. Notable company news included strong earnings reports from major

U.S. tech companies, contributing to the S&P 500's outperformance.September 2024

Bonds

September was a positive month for fixed income investors. The Bloomberg

Global Aggregate Index posted a performance of 1.1% in USD hedged terms. U.S.

Treasuries outperformed other developed markets, delivering returns of 1.3%. This

performance was driven by expectations of more aggressive rate cuts from the

Federal Reserve in the coming months. European sovereign bonds also benefited

from the positive bond market environment, with global government bonds rising

1.1% in USD hedged terms. In the corporate bond market, global investment

grade bonds performed well, with returns of 1.6% in USD hedged terms.

Currencies

The U.S. Dollar Index (DXY) weakened over the month, primarily due to

expectations of Federal Reserve rate cuts. This weakness in the dollar provided

support for emerging market currencies and assets. The Japanese Yen

experienced significant volatility early in the month following an unexpected rate

hike by the Bank of Japan. However, the currency stabilized later in the month as

the BOJ indicated a cautious approach to further rate increases. The Euro and

British Pound generally strengthened against the dollar, benefiting from the

greenback's weakness.September 2024

‍

Interest Rates

Central bank decisions and market expectations played a crucial role in shaping

interest rate movements: The Federal Reserve began its easing cycle with a

larger-than-expected cut. Markets are now pricing in further rate cuts for the

coming months. The European Central Bank maintained a relatively hawkish

stance, with markets anticipating fewer rate cuts compared to the Fed. The Bank

of England delayed action until after the UK general election but is expected to cut

rates in the near future. The Bank of Japan indicated they would be unlikely to

raise interest rates again until after the publication of October's inflation data in

November.

‍

Commodities

Gold prices remained relatively stable in September, supported by geopolitical

tensions and expectations of lower interest rates in the near future. Oil prices

experienced volatility, with initial increases due to OPEC+ production cuts.

However, prices eased later in the month following reports that Saudi Arabia was

considering abandoning its unofficial $100-a-barrel price target. Copper prices saw

gains, primarily driven by China's stimulus measures and their potential impact on

industrial demand.

‍

Inflation and Employment Data

In the United States, inflation continued to moderate, strengthening the case for

potential rate cuts by the Federal Reserve. The U.S. labor market showed signs of

cooling, with the unemployment rate drifting up to 4.2% from its low of 3.4% in

April 2023. In Europe, inflation continued to moderate, although economic growth

remained sluggish. Japan registered positive economic data, with purchasing

manager indices rising for several consecutive months.

‍

Outlook for October 2024

As we move into October, markets are likely to remain focused on central bank

policies, particularly the anticipated rate cuts from the Federal Reserve. The U.S.

presidential election in November may introduce additional volatility as it

approaches. Global economic growth is expected to remain subdued, with

particular attention on China's stimulus measures and their impact on global

demand. Geopolitical risks, including tensions in the Middle East, continue to pose

potential threats to market stability. While the overall mood in global markets is

cautiously optimistic, investors should remain vigilant to potential risks, including

softer economic growth, geopolitical uncertainties, and persistent pressure on real

estate markets.