5 min read
Equity markets across the world continued to perform well throughout Q2, spurred on by economic growth despite inflation remaining above target in several regions.
Whilst this article focuses in the main on June 2024 market news, there are references to events and market performance from previous months.
US
Inflation in April remained high, causing concern that the Federal Reserve (Fed) would keep interest rates higher for longer and leading to a drop in value for US stocks1 . By the end of the quarter, though, many stocks had recovered as inflation fell and economic data improved2.
The Personal Consumption Expenditure price index rose by 2.6% in the 12 months to May, down from 2.7% in April3. These figures were in line with expectations and led investors to feel optimistic about the Fed cutting interest rates in September4.
On the stock markets, the S&P 500 rose by 3.9% for the quarter and the Nasdaq rose by 8.3%, while the Dow fell by 1.7%5.
UK
Gross Domestic Product (GDP) rose by 0.7% in the UK in Q1, though early data suggests that growth remained flat in April6. Alongside the positive GDP figures, inflation fell to 2% year-on-year in May, down from 2.3% in April, bringing rates in line with the Bank of England (BoE) target7 .
The BoE held interest rates steady at 5.25% at their June meeting, though markets are pricing in an expected rate cut at the August meeting8.
Across the quarter, the positive economic figures led the FTSE All-Share to return 3.7%, bringing its year-to-date returns to 7.4%9.
The UK election held on the 4th July returned a new Labour government; how the markets reacted to the news will be included in next month’s commentary.
Europe
In June, the European Central Bank (ECB) cut interest rates from a record high of 4%, where they had stayed since September 2023, to 3.75%10. This was despite higher-than-anticipated inflation of 2.6% across the bloc in May11. Analysts expect that the ECB will announce further cuts to rates in their September and December meetings12.
Stock market returns in the eurozone were hindered by a snap election in France; concerned investors sold French stocks and bonds in response to the uncertainty13. The MSCI Europe ex-UK rose just 0.6% across the quarter and the French equity market fell by 6.4%14.
Asia
After weighing on the economy and equity markets for some time, the Chinese property market received a boost from the government in May. The announcement of the measures reassured investors and led to greater uptake of Chinese shares15.
The boost to Chinese equities alongside the popularity of artificial intelligence-based stocks on the Taiwanese stock market led the MSCI Asia ex-Japan index to return 7.3% across the quarter16.
Figures showing economic growth for Q1 were revised downward in Japan, showing that the economy contracted by 2.9% year-on-year in the first quarter, and reports suggest that conditions continued to be sluggish into Q217. This weighed on stock market returns, as the TOPIX returned 1.7% for Q2, despite year-to-date returns of 20.1%18.
What this means for you
The uncertainty posed by the French election during June offers a helpful reminder of the importance of diversification. As you read above, the French equity market fell by 6.4% in Q2 as investors worried about the idea that a party with no governing experience could secure a majority with voters19.
But look at the broader European funds, such as the MSCI Europe ex-UK, and you’ll notice that returns were positive, if muted, at 0.6%20. This is because the fund tracks stock markets from across the bloc, some of which were able to counter the losses that French stocks experienced.
Your portfolio offers you the same opportunity if you can balance it appropriately. Including investments from a range of asset classes, regions, and sectors can help to mitigate risk. If one sector or region underperforms, another may be able to recoup those losses.
Of course, fluctuations in value are part and parcel of investing in the stock market, and even a well-balanced portfolio can experience both ups and downs. But by taking the time to select the most suitable investments for your circumstances, you can give your wealth the greatest chance to grow so that you can achieve your long-term goals.
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:
1. 01.07.2024 | 13 Charts On the Market’s Q2 Turnaround | Morningstar
2. 01.07.2024 | 13 Charts On the Market’s Q2 Turnaround | Morningstar
3. 28.06.2024 | Stocks dip as investors digest inflation data; dollar dips | Reuters
4. 28.06.2024 | Stocks dip as investors digest inflation data; dollar dips | Reuters
5. 28.06.2024 | Stocks dip as investors digest inflation data; dollar dips | Reuters
6. 28.06.2024 | GDP quarterly national accounts, UK: January to March 2024 | Office for National Statistics
7. 19.06.2024 | Consumer price inflation, UK: May 2024 | Office for National Statistics
8. 20.06.2024 | Bank of England keeps rates at 5.25% in ‘finely balanced’ decision; traders lift bets for August cut | CNBC
9. 01.07.2024 | Review of Markets over the second quarter of 2024 | J. P. Morgan
10. 06.06.2024 | European Central Bank cuts interest rates for the first time since 2019 |CNBC
11. 28.06.2024 | Fed and European Central Bank could cut interest rates in September, Morgan Stanley strategist says | CNBC
12. 28.06.2024 | Fed and European Central Bank could cut interest rates in September, Morgan Stanley strategist says | CNBC
13. 25.06.2024 | Investors concerned by French elections, Paris stock market head says | Reuters
14. 01.07.2024 | Review of Markets over the second quarter of 2024 | J. P. Morgan
15. 17.05.2024 | China unveils ‘historic’ rescue for crisis-hit property sector as home prices slump again | CNN
16. 01.07.2024 | Review of Markets over the second quarter of 2024 | J. P. Morgan
17. 01.07.2024 | Japan revises economic growth in 1Q downward, as latest data show sluggish demand and rising prices | AP News
18. 01.07.2024 | Review of Markets over the second quarter of 2024 | J. P. Morgan
19. 25.06.2024 | Investors concerned by French elections, Paris stock market head says | Reuters
20. 01.07.2024 | Review of Markets over the second quarter of 2024 | J. P. Morgan
FP2024-317