Cappuccino Commentary

The world’s economic pulse in November could be summed up in one phrase: risk is back in vogue. After a tumultuous year marked by uncertainty and caution, investors seemed ready to embrace risk across most asset classes, resulting in a month of strong performances, albeit with some notable exceptions.

Global markets faced a turbulent October as a mix of economic, political, and policy-related challenges weighed on investor sentiment. 2024 has seen equity markets deliver positive returns but part of these returns were given up in October. Markets had several things that they looked to address through the month, which included the UK budget, a weaker U.S. jobs report, mixed corporate earnings from major tech companies, and uncertainties surrounding the U.S. election. Additionally, the Federal Reserve’s slower path for rate cuts, ongoing inflation concerns, and fluctuating oil prices due to Middle Eastern tensions added to market pressures, while gold continued to rally on the back of all these market uncertainties..

The global equity markets in September delivered mixed outcomes, influenced by various economic developments across key regions. Interest rate decisions, particularly in the US, played a pivotal role in driving market returns. The Federal Reserve surprised investors by cutting interest rates by 50 basis points—double what many had expected. This proactive move was aimed at countering potential economic weakness. The lower borrowing costs resulted in the US equity market hitting new highs. The question remains whether inflation is fully under control or whether we may see this re-emerge going forward.

As many investors headed off on holiday, August presented global markets with a much more turbulent environment, spurred primarily by concerns over a slowing of economic growth in the US. As the month progressed, fears eased, buoyed by more stable economic data and assurances from central banks, particularly the US Federal Reserve. By the end of August, much of the earlier losses had been recovered, allowing equity markets to regain their footing.

Occasionally, there are slow months when we feel we are reporting on more trifling matters. July was not one of those months. July was a month of significant volatility, driven by political and economic news.

May proved to be a decent month for both equity and bond market returns which were boosted by improving economic conditions coupled with anticipation of interest rate cuts by the Bank of England (BOE) and the Federal Reserve (FED) later this year.  There were some exceptions with small losses in Japanese equities and Global Government bonds however most of this was attributed to currency moves as Sterling rallied against most other developed currencies.