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April – June 2024


  • 2024

The period May to July 2024 was a broadly positive one for markets, shown by the S&P 500 rising +9.66% from 5,036 to 5,522 – and in particular, the tech-focused NASDAQ having a very strong period, up +12.41% from 15,658 to 17,599.

Smaller caps throughout the period have also enjoyed a buoyant time – shown by the Russell 2000 jumping +14.21% from 1,974 to 2,254, with most of that coming in July (+10.10%). This phenomenon was also seen in the UK, with the more mid-cap focused FTSE 250 rising +8.19% from 19,965 to 21,601. Less impressive were the returns of the S&P Euro Plus, with the continent having been rocked by political uncertainty over the period – as it rose just +2.10% from 2,91 to 2,543. Similarly, the Nikkei 225 was a relative laggard, rising +1.81% from 38,406 to 39,102.

This market performance came against a backdrop of central banks finally beginning their rate-cutting cycle, with the Bank of Canada on 5th June, and the European Central Bank on 6th June leading the way. The ECB cut from 4% to 3.75%, with President Lagarde stating the inflation outlook had improved ‘markedly’. Whereas policymakers did hold their rate level at the July meeting, they said the possibility of another cut in September was ‘wide open’ – downplaying fears over inflation remaining ‘sticky’ though also noting that services inflation staying above 4% was ‘a worry’. The Bank of England was the next major bank to follow suit on 1st August, reducing their rate from 5.25% to 5%, with members of the Monetary Policy Committee narrowly voting to do so by 5 votes to 4. This comes as the economic picture seems to be turning for the country, with headline inflation for June having now reached the 2% target for the second consecutive month – and GDP growth for the 3 months to May 2024 at 0.9%, the fastest rate for more than 2 years. All eyes will now be on the US Federal Reserve to see when they will begin their cutting cycle – with markets mostly pricing that in to happen at their 18th September meeting, despite policymakers no doubt fearing their impartiality will be questioned with the US election on 5th November nearing.

Political developments significantly influenced financial markets over the last three months, with major elections in India and Europe. In Europe, the European Parliament elections saw left-wing and centrist parties lose ground to more right-wing parties – not so unusual on the face of it – though this did result in some rather dramatic outcomes, with the most significant of these being French President Emmanuel Macron dissolving parliament and calling for a snap election. Although it looked like the far-right National Rally party would end up the largest party after the first round of voting, a tactical alliance between Macron’s centrist ‘Ensemble’ coalition and the left-wing alliance saw them reduced to third place after the second round on 7th July had concluded. Ultimately, no party ended up winning a majority of seats, with a hung parliament declared – a situation which threatens to usher in a sustained period of political paralysis within the European heavyweight. With markets hating uncertainty, it is of no surprise that the French CAC 40 index fell -8.60% from a period peak on 15th May through to the end of July.

In India, incumbent Prime Minister Narendra Modi, in power since 2014, was expected to win a large majority owing to the country having enjoyed strong economic growth since he was first elected. However – his Bharatiya Janata Party won just 240 out of 543 seats, resulting in a hung parliament. As the results were being announced, the MSCI India index fell over -7% as investors feared Modi’s influence would be diminished – though the index recovered quickly as it became clear he would stay in power at the head of coalition government. The index ultimately gained +9.18% over the 3-month period.

The period also saw UK Prime Minister Rishi Sunak declare his own general election on 22nd May, to be held on 4th July. After 14 years in power, the Conservative Party ended up suffering their largest ever defeat – falling from 344 to 121 seats, including that of twelve Cabinet ministers and former Prime Minister Liz Truss. For Labour, despite achieving an underwhelming vote share of 33.7%, a total of 411 seats won meant it gained a massive 174-seat majority and saw Keir Starmer assume the role of Prime Minister. Despite being widely expected, the FTSE all-share still gained +2.01% through to the end of month after having been slightly down -0.83% over the campaign period. In the US, a dreadful debate performance from President Joe Biden on 27th June saw a widespread belief that he should pull out of the campaign, with Donald Trump subsequently climbing in opinion polls. This was only compounded after Trump survived an assassination attempt by centimetres on 13th July, with a bullet grazing his upper right ear. The image of him, fist raised high, blood smeared on his face, American flag waving in the background whilst he was being bungled away by Secret Service agents has the potential of being one of the defining political photographs of the century and only served to enhance his poll numbers. However, this rise was arrested on 21st July after Biden declared he would be stepping down, endorsing his Vice President Kamala Harris for the nomination. Harris has since been able to enjoy a honeymoon period in the polls, with both candidates effectively even in the betting odds as of 31st July.

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