October – December 2024
From October to December 2024 index returns were mixed across regions – with the US once again leading the way. The S&P 500 rose +2.07%, but it was the technology-focused NASDAQ which performed best – rising +6.17%. In contrast, the small-cap Russell 2000 only inched higher by +0.01% – though it did rise +10.84% in November before those gains were erased in December. The S&P Euro Plus endured another difficult period, falling -3.71%, as the FTSE All-Share also fell -0.96%. In the East, the Nikkei 225 had a good quarter, rising +5.21%, though China’s CSI 300 shed -2.06% as investors remained cautious on the country despite central bank stimulus announcements. Pound Sterling depreciated -6.42% against the US Dollar, strengthened +0.72% against the Euro and also strengthened +2.46% against the Japanese Yen.
Returns for a Sterling investor over the last three months for a selection of indices are below:
| US Equities | 9.82% |
| Japanese Equities | 2.66% |
| Corporate GBP Bonds | 0.24% |
| UK Equities (All-Share) | -0.36% |
| Conventional UK Govt Bonds | -1.39% |
| Emerging Market Equities | -1.47% |
| Europe Ex UK Equities | -4.24% |
Across the West, political developments and policies were the main drivers of investment returns over the period. In the UK, Labour’s first Budget since returning to power was held on 30th October, with a slew of tax rises implemented totalling £40 billion. Index returns were volatile in both the run-up and aftermath of the announcement as the FTSE 100 fell -4.29% from 17th October to 12th November –rallied +4.16% to 3rd December, before falling another -3.29% to 20th December. The largest impact was felt in the gilt market, however, as the 5-year rose from 3.866% to 4.343%, and the 30-year rose from 4.587% to 5.134%, just slightly below the peak of 5.170% seen during the aftermath of Liz Truss’s ‘mini-budget’ in September 2022.
On 4th November, the election of Donald Trump proved to be a significant market-moving event. Originally expected to be ‘too close to call’ – the Republicans achieved the ‘Red Sweep’ and assumed control of the Senate, the House, and the White House. The immediate reaction in equity markets was extremely positive – with the S&P 500 rising +5.60%, and the Russell 2000 +9.72% from 4th November to month-end. This enthusiasm was tempered in December as market participants began to fully digest the consequences that spending increases, tax decreases, immigration crackdowns, and tariff implementations would have on the US budget deficit. Indeed, the S&P 500 fell -2.50% and the Russell 2000 erased most of its November gains by falling -8.40%. Bond investors were less enthused from the outset, as the yield on the 10-Year Treasury rose from 3.787% to 4.576% over the quarter.
In Europe, Michel Barnier became France’s shortest-serving Prime Minister after he tried to force through an austerity budget (comprising €40bn in spending cuts and €20bn in tax increases) without a formal parliamentary vote on 4th December. A no-confidence vote was supported by the usually diametrically opposed leftist New Popular Front and the far-right National Rally – an ominous sign of the challenges facing President Macron in navigating a tenuous economic landscape with a thoroughly divided parliament. Similarly, in Germany, Chancellor Olaf Scholz dismissed Finance Minister Christian Lindner on 6th November, causing the collapse of the three-party ‘traffic light’ coalition government – a move which was followed by the dissolution of the Bundestag on 27th December, and new elections announced to be held for 23rd February 2025. These crises coincided with the OECD slashing growth forecasts for both France and Germany in 2025 (to 1.2% to 0.9% and 1.1% to 0.7% respectively) and led to European equity markets struggling and the Euro depreciating against Sterling over the period.
However – this background does make the path for interest rates more transparent for the ECB, as their main deposit rate facility was lowered by 25bps in both November and December (to 3%), with policymakers highlighting that ‘the disinflation process is well on track’, with money markets now expecting a further 4 cuts in 2025. It is a slightly murkier outlook for the US Federal Reserve – a 25bps cut in December was accompanied by statements that the cut was a ‘close call’, that caution would be exercised for further decisions, and that their ‘policy stance is now significantly less restrictive’. Indeed, the Fed indicated that they would only cut twice more in 2025 – a move which saw falls of -2.95% for the S&P 500 and -4.39% for the Russell 2000 in one day. This knock to sentiment meant there was no ‘Santa Rally’ for 2024 (defined as the rise in stock prices during the last 5 trading days of December, and first 2 of the following January) – historically one of the more reliable market trends, though of course it is not guaranteed.
