Cappuccino Commentary

The shortest month of the year certainly didn’t feel brief as markets lurched in response from one geo-political drama to another. US markets took the brunt of the damage as Trump’s proposed (and delayed for now) tariffs on Mexico and Canada led to inflation fears. Consumer confidence numbers didn’t help matters, and lingering fears over the sustainability of earnings from big US tech stocks saw the NASDAQ suffer its biggest monthly decline in ten months.

The new year has started strongly across financial markets, with equities, bonds, and alternative investments all delivering positive returns. A weakening sterling provided an additional boost to international holdings for UK investors, adding to the strong start.

The final month of 2024 offered a mixed bag for global markets, capping off a year that was largely favourable for risk assets but ended on a more cautious note. December’s economic pulse reflected a challenging environment, as markets navigated the implications of a shifting policy landscape, persistent geopolitical tensions, and regional economic divergences. Performance across asset classes was mixed, with equities delivering modest gains in some regions but generally underwhelming results overall. Alternatives and bonds faced broad declines, while currency movements highlighted the strength of the dollar against its major counterparts.

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.