Global Markets

 

Volatility increased in both equity and bond markets during October, despite global equities briefly touching new highs mid-month. Although signs of resilient economic growth, especially in the United States, were evident, growth risks remained a primary concern for investors. The upcoming US elections and the potential impact of policy shifts on inflation and interest rates further contributed to uncertainty.

Developed market equities experienced a negative return of 2.0 per cent, while emerging markets declined by 4.3 per cent. Japanese stocks were the best performers, with the TOPIX index gaining 1.9 per cent for the month.

In fixed income, government bond yields surged in the US and Europe. Notably, the yield on the 10-year UK government bond climbed to a 12-month high following the new UK government's announcement of net fiscal easing in its initial budget.

In commodities, Brent crude oil remained near the lower end of its recent trading range, despite heightened geopolitical risks. Conversely, dollar-denominated gold continued its upward trajectory, reaching new highs.

 

As of 31 October 2024:

UK 10 Year Gilt Yield 4.43%
US 10 Year Treasury Yield 4.29%
Germany 10 Year Bund Yield 2.39%

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UK Market

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UK economic data hold up as the growth outlook improves. Recent labour market remains tight, with the unemployment rate falling to 4.0% and pay growth remaining high but is clearly  slowing. Despite this, September's headline inflation declined significantly to 1.7% year-over-year, with core inflation at 3.2%.

Later in October, the Labour party announced their first budget, raising taxes and moving to a debt target that includes government assets, putting pressure on the UK Gilt market due to stronger-than-expected levels of spending now planned for 2025. The spread between UK and German yields rose to 2%, the highest in a year. Equities struggled, with the FTSE 100 little changed since April.

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Ark Insights

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In late October, the Labour government delivered their first Budget with raising the Government's tax income by approximately £40 billion. Corporate clients will bear the brunt of this, with substantial increase in the employer National Insurance Contributions (NICs) rate and a reduction in the threshold, which will bring in £25 billion taxes.

Private clients should be aware of the current remittance basis of taxation for non-domiciled individuals will be abolished; Capital Gains Tax will see its lower rate increased to 18% and the higher rate to 24%; the domicile-based system for Inheritance Tax will be replaced by a residency-based system; from 6 April 2027, inherited pension pots will also be subject to Inheritance Tax. To mitigate the impact of these changes, private clients may wish to consider optimising their life insurance and Will planning to manage their Inheritance Tax liability.

As always, your advisors would be more than happy to help you with any queries.

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The views expressed in this update are not intended as an offer or solicitation for the purchase or sale of any investment or financial instrument. The views reflect the views of Ark Investment Management at the date of this document and, whilst the opinions stated are honestly held, they are not guaranteed and should not be relied upon and may be subject to change without notice. Investments entail risks. Past performance is not necessarily a guide to future performance. There is no guarantee that you will recover the amount of your original investment. The information contained in this update does not constitute investment advice and should not be used as the basis of any investment decision. Any references to specific securities or indices are included for the purposes of illustration only and should not be construed as a recommendation to either buy or sell these securities or invest in a particular sector. If you are in any doubt, please speak to us or your financial adviser as appropriate.

Issued by Ark Investment Management Ltd which is authorised and regulated by the Financial Conduct Authority. 

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