Data source: Bloomberg

The third quarter of 2024 ended with healthy returns across most major asset classes, despite several bouts of market volatility. A combination of weaker US economic data, an interest rate hike from the Bank of Japan and thin summer liquidity saw stocks hit particularly hard in early August. However, the long-anticipated start of the Federal Reserve’s rate cutting cycle in September, along with a less hawkish tone from Japanese policymakers and new stimulus in China, helped to soothe investor concerns and support a strong rally in stocks into quarter end.

 Sources: Schroeders, Bloomberg, Yahoo Finance, JP Morgan

In the US

• US shares advanced over the quarter but sector performances were mixed.

• All sectors aside from energy posted positive returns but top performing sectors included utilities and real estate while information technology posted only a small advance.

In the Rest of the World

• Emerging market equities delivered strong gains in Q3, outperforming developed markets, supported by the announcement of new stimulus measures in China.

In the US

• In the US, the combination of a stronger-than-anticipated decline in July’s non-farm payrolls, the unemployment rate trending higher, and a larger-than-expected drop in inflation August, spurred the Fed’s decision to begin its long-awaited cutting cycle with a 50 bps cut, after having let them on hold at a 23-year high in July.

• The current Fed Funds rates are now 4.75% to 5.00%.

In the Rest of the World

• The Chinese government announced a raft of stimulus measures – ranging from rate cuts to fiscal support – in a bid to reverse a slowdown in the broader economy.

• The US Fed decreasing its interest rates by 0.50% and the Bank of Japan increasing their rates by 0.25% caused a significant swing in the currency market: The yen sharply strengtheningd against the US dollar.

• Digital assets had mixed returns during the quarter. Bitcoin returned 1% in Q3 (+50% year-to-date), while Ethereum was down -24% in Q3. Following drawdowns in August, digital asset markets recovered in September, supported by Fed rate cuts mid-month.

• The main crypto theme this year has been institutional access, and this continued in Q3 as several large asset managers launched their Ethereum spot ETFs. The SEC also approved options to be traded on the Bitcoin ETF, which will lead to market efficiencies, and further connects crypto with traditional markets. This trend of further institutionalisation of digital assets is likely to continue, fuelled in part by better regulatory clarity which should be expected in the US, as both presidential candidates have now shown support for the digital asset industry.

• The S&P GSCI Index fell in the third quarter. Energy was the weakest component of the index due to lower global demand, while agriculture, industrial metals, livestock, and precious metals gained.

• Within energy, there were sharp price declines, despite heightened tensions in the Middle East, as global demand weakened due to growth concerns.

• In agriculture, the price of coffee, cocoa, and sugar rose significantly in Q3, while soybeans and wheat prices were modestly lower.

• Within industrial metals, aluminium, zinc, and copper achieved modest gains, while the price of lead declined.

• The precious metals component was sharply higher in Q3, with gold achieving solid gains playing its role of “safe haven” during the volatile summer.

Konstantin Veit, PM, Pimco

“ The next cut of the ECB is likely to be in December.”

Richard Madigan, CIO, JP Morgan

“Political theatre can easily spill over into nervous markets. That can create short term investment opportunities. 5% increase in oil prices adds about 0.1% to inflation in advanced economies like the United States.“

Strategy Equity Team, Goldman Sachs

“We forecast just a 3% S&P 500 annual return the next 10 years, and a 72% probability that stocks trail bonds. Our historical analyses show that it is extremely difficult for any firm to maintain high levels of sales growth and profit margins over sustained period of time.”

5 November: US Presidential Elections

The world is turning to the USA for their 47th Presidential Election.

What we can expect: 

Between Kalama Harris, the Democrat candidate and the Republican Donald Trump, WHO WILL WIN? The surveys keep changing so we will have to wait for Nov 5th when 244 millions of Americans will go to the polls. 

6-7 November: FOMC Meetings

The FOMC (Federal Open Market Committee) is the branch of the Federal Reserve that determines the direction of monetary policy of the United States.

What we can expect: 

In this meeting, we can expect interest rates to remain unchanged or reduced by 25-bps, as the Fed looks for signs of a US economy soft landing, the consensus suggest it is more likely to have rates 2 more rate cuts this year.

7 November: BoE Announcement and Minutes

The Bank of Engand (BoE) is the UK’s central bank. Its mission is to deliver monetary and financial policies.

What we can expect: 

We can expect to see rates unchanged after the last cut in August from a 5.25% to a 5% rate .

7-25 October: 89th Session of the Convention of Elimination of All Forms of Discrimination against Women (CEDAW)

Held in Geneva, Switzerland, the CEDAW (Convention on the Elimination of All Forms of Discrimination Against Women) is an international treaty adopted by the United Nations in 1979. Its main goal is to eliminate discrimination against women and promote gender equality globally.

What we can expect: 

This session will cover country-specific issues, including human rights in Palestine, Afghanistan, Ukraine, and Venezuela. The panel discussions will also address topics such as refugee conditions, women rights and sustainable economic growth, among others.