April – June 2024

The UK also enjoyed a positive period, with the FTSE 100 rising +2.66% from 7,953 to 8,164 – with April and May also seeing multiple all-time highs being reached, the highest of which came on 15th May at 8,446. In Europe, political turmoil in France meant that the S&P Euro Plus fell -1.13% from 2,559 to 2,530.

The period began with a particularly volatile April, primarily driven by escalated tensions in the Middle East. On 13th April, Iran launched over 300 missiles at Israel, and although 99% of them were shot down with no casualties reported – fears were exacerbated further when Israel decided to retaliate with their own missile strike on 19th April. Fortunately, Iranian officials decided not to retaliate further – instead declaring the issue settled and choosing to mock the attack for causing no damage and claiming no casualties. The release of a hotter than expected inflation print in the US also helped compound this volatility, with it coming in at 3.5% against 3.4% expected. The S&P 500 fell -5.46% from the start of the month through to the 19th, whilst Brent crude oil remained elevated through the month, before eventually falling -14.97% from its peak on 5th April through to 4th June. The FTSE 100, on the other hand, gained +2.41%, partly due to its high weighting to oil and gas companies such as BP and Shell.

On 5th & 6th June, the Bank of Canada and the European Central Bank became the first major central banks to cut their primary interest rates, in a signal that the rate-cutting cycle has finally started for the developed world after the effects of high inflation had led to a period of rate hiking, to the detriment of financial markets, throughout 2022 and 2023. The ECB decided to cut from 4% to 3.75%, with President Lagarde stating the inflation outlook had improved ‘markedly’. The latest figure came in at 2.5% for the 12 months to June – continuing a run of 9 consecutive months where it has come within 1% of the bank’s 2% target. Almost as soon as these cuts were announced, speculation increased around when the US Federal Reserve would follow suit. At the start of the year, markets expected the Fed to cut around six times in 2024, though markets now anticipate less than two, with policymakers also wary about implementing a cut in the run-up to the US election on 5th November for fear of questions being raised over their impartiality.

Indeed, political developments in general were a key driver of financial markets over the last three months, with several major countries heading to the polls – none less significant than the largest democracy in the world, India. A mammoth undertaking, with almost a billion people eligible to vote out of a population of 1.4 billion, this was the largest election ever held and lasted six weeks, from 19th April to 1st June. Incumbent Prime Minister Narendra Modi has been in power since 2014 and was widely expected to win a huge majority, with the country thriving economically and enjoying high levels of GDP growth (7% in 2022, 7.6% in 2023). However, Modi did not win the landslide victory he had expected. Instead, his Bharatiya Janata Party won 240 seats (out of 543), becoming the largest party in a hung parliament – meaning he was able to remain as Prime Minister but now needs to rely on other parties in his ‘National Democratic Alliance’ coalition. The MSCI India index lost over -7% on 4th June as the results were announced, as markets feared Modi’s influence would be diminished – however, by the end of the week, these fears receded quickly as it became clear he would stay in power, with the index ultimately gaining +10.21% over the three month period.

With campaigning for the 4th July UK general election well underway, June also saw elections for the European Parliament held across member states from 6th to 9th June. Whereas the overall results were not too dramatic – with centrist and left-wing parties losing ground and gains for more right-wing parties – there were some serious ramifications within certain member states. Belgian Prime Minister Alexander De Croo announced his resignation after a significant defeat for his party, Open Flemish Liberals and Democrats – though French President Emmanual Macron dissolved the French parliament somewhat unexpectedly and announced a snap general election to be held on 30th June and 7th July. Market impact was resoundingly negative, with the uncertainty causing the French large cap index, the CAC 40, to fall -9.23% from a period peak on 15th May to the end of June. After the first round of voting, the far-right National Rally were looking likely to end up the largest party in parliament, and President Macron’s centrist ‘Ensemble’ coalition being reduced to the third largest. Time will tell whether this is the beginning of the end for Macron, though his political career so far has been littered with high-risk gambles that have paid off – none more so than his coming from nowhere to set up his own party in 2016 and win the Presidency a year later in 2017.