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Many major central banks are reducing interest rates as inflation has fallen within target ranges. Though October saw a range of positive economic updates, stock market returns were disappointing with political and fiscal events weighing on sentiment in the UK and US.
Whilst this article focuses in the main on October 2024 market news, there are references to events and market performance from previous months.
US
Figures released in October suggest that the US economy experienced growth in Q3, as Gross Domestic Product (GDP) grew by 2.8% year-on-year for the quarter1. This was mostly driven by strong consumer spending and the fiscal measures put in place by the Federal Reserve (Fed)2.
Inflation figures for September showed that prices increased slightly more than anticipated. The Consumer Prices Index (CPI) rose by 2.4% year-on-year, though economists had predicted a rate of 2.3%3.
After cutting its key interest rate by half a percentage point in September, the Fed seems likely to make a further 0.25% cut at its next meeting in November according to economists4.
Even though economic data was positive, stock markets fell during October. The S&P 500 dropped by 0.9% for the month5.
Ahead of the US election, uncertainty surrounding the outcome caused global markets to fall in the final week of the month as investors grappled with the potential for market turbulence6.
UK
Inflation in the UK fell significantly in September, as figures released in October showed that the CPI fell to 1.7% in September, down from 2.2% in August7.
Wage growth fell too, as the annual growth in total earnings including bonuses was 3.8% in the three months to August, down from 4.1% compared to the same period to July8. The unemployment rate also fell to 4% in the three months to August9.
The International Monetary Fund upgraded its growth predictions for the UK to 1.1% in 2024, up from its previous estimate of 0.7%10.
This was good news in the month that the new Labour government announced its first Budget, which included £40 billion worth of tax rises, including an increase to the amount of National Insurance that employers will pay11.
The cost of government borrowing rose in the immediate aftermath of the Budget to its highest level in a year, before slightly falling back. That could have the effect of increasing the rates on loans and mortgages12.
The Bank of England confirmed a 0.25% interest cut in November, but some concern remains that inflationary pressures may slow the pace of future cuts13.
UK stock markets underperformed in October. The FTSE All-Share fell by 1.6% for the month, though year-to-date earnings remain strong at 8.1%14.
Europe
In the eurozone, inflation figures for September were revised down from 1.8% to 1.7%, but preliminary figures suggest the rate rose to 2% in October15.
The European Central Bank decided to cut the three main interest rates by a further 0.25% because the disinflation process appears to be on track and there are signs that economic performance is weakening16.
Data showed that Germany’s economy grew in the three months to September, which avoided the eurozone’s largest economy falling into another recession17. After contracting by 0.3% in Q2, GDP in the country grew by 0.2% in Q318.
This contributed to economic growth for the eurozone, which increased by 0.4% in Q3, exceeding economists’ expectations that it would grow by 0.2%19.
European stock markets underperformed in October. The pan-European STOXX 600 fell by 3.4% for the month, its worst monthly performance in a year20.
Asia
China’s manufacturing activity expanded in October for the first time in six months21. The parliamentary committee is due to meet again in early November and is expected to release details of further fiscal stimuli22.
At the end of the month, the Bank of Japan held its policy rates steady at 0.25% and stated that it would hike rates further in the coming months provided economic performance continues to recover23.
The Japan TOPIX index was one of the best-performing major stock market indexes in October, rising by 1.9% for the month. Its year-to-date earnings are 16.4%24.
Despite the improvement in China’s economic performance, equities didn’t perform quite so well. The MSCI Asia ex-Japan dropped by 4.5% for the month25.
What this means for you
Though October was a positive month for many economies, equities underperformed26. This can be nerve-wracking if your portfolio generates lower returns than you’d hoped for.
But remember that occasional dips in value are part and parcel of investing in the stock market and are to be expected.
Rather than focusing on short-term returns, it’s usually sensible to tune out the noise of the headlines and instead focus on your personal goals and the long-term potential of your investments.
Over time, provided you adhere to the key principles of investing and avoid making rash decisions, your wealth will have the opportunity to benefit from market recoveries as you work towards your 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. 30.10.2024 | U.S. economy grew at a 2.8% pace in the third quarter, less than expected | CNBC
2. 30.10.2024 | U.S. economy grew at a 2.8% pace in the third quarter, less than expected | CNBC
3. 10.10.2024 | US consumer prices rise on food; Hurricane Helene muddies labor market picture | Reuters
4. 29.10.2024 | Federal Reserve to cut rates by 25 basis points at next two meetings: Reuters poll | Reuters
5. 01.11.2024 | Review of markets over October 2024 | J P Morgan
6. 01.11.2024 | Markets recap: Stocks fall amid uncertainty ahead of US Election | Euro News
7. 16.10.2024 | Consumer price inflation, UK: September 2024 | Office for National Statistics
8. 15.10.2024 | Pay growth in Great Britain falls below 5%, making interest rate cut more likely | The Guardian
9. 15.10.2024 | Pay growth in Great Britain falls below 5%, making interest rate cut more likely | The Guardian
10. 22.10.2024 | Reeves welcomes IMF's improved growth forecast | BBC
11. 30.10.2024 | UK’s Labour government raises taxes by £40 billion in new budget plan | CNBC
12. 31.10.2004 | Investors’ reaction to Budget ‘very different’ to Truss |BBC
13. 07.11.2004 | City analysts overwhelmingly predict Bank of England rate cut |The Guardian
14. 01.11.2024 | Review of markets over October 2024 | J P Morgan
15. 31.10.2024 | Euro zone inflation rises to higher-than-expected 2%, weakening case for jumbo rate cut | CNBC
16. 17.10.2024 | Monetary policy decisions | European Central Bank
17. 30.10.2024 | ‘Ray of hope’: German economy grows 0.2% ending recession fears | The Guardian
18. 30.10.2024 | ‘Ray of hope’: German economy grows 0.2% ending recession fears | The Guardian
19. 30.10.2024 | ‘Ray of hope’: German economy grows 0.2% ending recession fears | The Guardian
20. 31.10.2024 | Europe stocks close October with biggest monthly loss for a year; UK housebuilders plunge after budget | CNBC
21. 30.10.2024 | China’s factory activity expands for the first time since April, official survey shows | CNBC
22. 30.10.2024 | China’s factory activity expands for the first time since April, official survey shows | CNBC
23. 31.10.2024 | Asia markets slip as BOJ holds rates; China factory activity expands for first time since April | CNBC
24. 01.11.2024 | Review of markets over October 2024 | J P Morgan
25. 01.11.2024 | Review of markets over October 2024 | J P Morgan
26. 01.11.2024 | Review of markets over October 2024 | J P Morgan
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