Investment Market update: August 2024

Global equities experienced volatility throughout July for a variety of reasons.

5 min read

July presented a mixed picture for equities around the globe, with volatility affecting many major indexes. Read on to discover how global events affected stock markets and what it could mean for your investments.

Whilst this article focuses in the main on July 2024 market news, there are references to events and market performance from previous months.

US

The S&P 500 fell 2.3% when earnings reports from some of the “Magnificent Seven” failed to live up to expectations last month. On 24 July, shares in Tesla fell by 12% after it reported a 45% drop in quarterly profits¹. Meanwhile, investors were unimpressed by Alphabet’s slow advertising growth, causing the company’s shares to fall by 5%².

On the final day of the month, US stocks experienced a rebound, attributed mainly to the Federal Reserve’s decision to hold interest rates steady³. The S&P 500 rose by almost 1.6%, the Dow Jones Industrial Average rose by 0.2%, and the tech-heavy Nasdaq rose by more than 2.6%⁴.

Unemployment rose in July as 114,000 jobs were added, far below economists’ expectations of 175,000⁵. This increased market expectations of a more significant interest rate cut than previously anticipated, though Fed chair Jerome Powell said this was not likely at present⁶.

UK

The UK held a general election at the start of July, which returned a Labour Government after 14 years of the Conservative party being in power. The result had been widely expected throughout the election campaign, so the reaction on stock markets was muted yet positive. The FTSE 250 rose by 1.8% in early trading on the day the result was announced, and the FTSE 100 rose by 0.4% at the same time⁷.

Figures released in July show that the UK economy grew by more than expected in May. Gross Domestic Product (GDP) rose by 0.4% month-on-month, which was double the predicted rate⁸.

While this is positive news for the economy, there were concerns that it could cause the Bank of England to delay interest rate cuts⁹.

The economic momentum led to increased investor confidence in the UK. The FTSE All-Share rose by 3.1% for July¹⁰.

Europe

Business activity was flat in the eurozone in July. The Hamburg Commercial Bank (HCOB)'s preliminary composite Purchasing Managers' Index recorded a reading of 50.1 for the month¹¹. A score above 50 indicates growth and below 50 indicates contraction.

The European Central Bank (ECB) held interest rates steady at their July meeting after cutting them in June¹². Economists expect the ECB to cut interest rates twice more before the end of the year¹³.

European stocks underperformed compared to the US and UK in July. The MSCI Europe ex-UK grew by 0.6% for the month¹⁴.

Asia

Official figures revealed that China’s GDP rose by 4.7% in Q2, below the expected increase of 5.1%¹⁵. Industrial production beat expectations, however, rising 5.3% year-on-year in June, with high-tech manufacturing rising by 8.8%¹⁶.

The real estate sector continued to weigh on equities in China in July. Despite the government implementing measures to improve liquidity in the financial sector, the MSCI China Index fell by 1.2% in US dollar terms¹⁷.

July was a mixed picture for the Japan TOPIX index. It reached a historical high early on but finished the month with a -0.5% fall¹⁸. Similarly, the yen experienced a sharp rise in value from 162 yen to 150 yen against the US dollar by month end¹⁹.

What this means for you

The slump that occurred among US tech stocks in mid-July may have been concerning for investors with holdings in this sector. After more than a year of exceptional growth, such a significant fall may have come as a shock.

At times like these, you might be tempted to move your wealth out of stocks that are experiencing volatility. It’s natural to want to protect yourself from financial losses, and media headlines can add to the confusion and panic.

But this month has shown another side to the story. Despite the fall in the middle of the month, the US stock market rebounded by the end of the month. If you’d moved your wealth out of these investments when they fell, you’d likely have missed this rebound too.

If news headlines about stock market volatility make you feel nervous, focus on your own personal goals and the long-term potential of your portfolio. This is a far more sensible strategy than making rash decisions based on panic or fear.

Please note: This guide is for general information only and does not constitute advice. The information is aimed at retail clients only.

The content of this guide was accurate at the time of writing. While information is considered to be true and correct at the date of publication, changes in circumstances, regulation, and legislation after the time of publication may affect the accuracy of the guide.

Sources:

FP2024-357

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