Global Markets

 

Despite several market volatility, the third quarter of 2024 ended with decent returns across most major asset classes. For the first time in four years, the Federal Reserve reduced the interest rate by 0.5 percentage points in September. This, coupled with a less hawkish stance from the Bank of Japan and fresh stimulus initiatives in China, contributed to assuaging investor concerns and underpinning a strong rally in equity markets towards the end of the quarter.

Developed market equities delivered a 6.5% during the period. The US S&P 500 Index continued to advance, returning 5.9% during the quarter, with the UK and ex-UK European markets delivering returns of 2.3% and 1.6% respectively. MSCI Asia ex Japan was the best performing major region, returning 10.6% for the quarter, supported by the announcement of new stimulus measures in China.

Fixed income markets were buoyed by the prospect of falling interest rates, with the Barclays Global Aggregate Index returning 7.0% in the third quarter. Government bonds and credit both delivered solid returns, while emerging market debt gained 6.1% during the quarter, putting it near the top of the fixed income sector's year-to-date performance list.

 

As of 30 September 2024:

 

UK 10 Year Gilt Yield 4.01%

US 10 Year Treasury Yield 3.79%

Germany 10 Year Bund Yield 2.13%

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UK Market

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The UK continues to recover from the mild recession that occurred in the second half of 2023. Quarterly GDP data showed that the UK economy outpaced the other G7 during the first half of 2024. UK equities rose during the quarter as the Labour Party's landslide victory in the general election ignited hopes for a sustained domestic economic recovery. Most recently, Bank of England (BoE) Governor Andrew Bailey suggested that the BoE could be "more aggressive" in cutting interest rates, depending on the inflation rate.

Positive market sentiment was somewhat tempered by new UK Prime Minister Keir Starmer's warning that the autumn budget would be "painful." He indicated that tax increases and spending cuts could be necessary to address a projected £22 billion shortfall in public finances. The PMI was lower in September than in August, interrupting a five-month long trend in increasing manufacturing production.

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Ark Insights

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Ark will be closely monitoring the potential market implications of the UK Autumn Budget on 30 October and the geopolitical landscape. The recent escalation of tensions in the Middle East has heightened concerns about a worsening conflict between Iran and Israel, which could destabilise oil prices and expose the global economy to a 1970s-style energy shock.

Precious metals prices have surged by more than 20 percent this year, reaching an all-time high of over $2,600 per troy ounce as of September 30th. A recent Goldman Sachs study predicted prices would climb to $2,700 by early next year. Ark believes that gold has become a preferred hedge against geopolitical and financial risks. For private investors, one way to gain exposure to gold is through an exchange-traded commodity backed by physical gold.

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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