Investment Market update: September 2024

Learn what caused volatility on stock markets across the world at the start of August and how other economic developments could affect your investments.

5 mins

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

Weak economic data from the US and the Bank of Japan’s interest rate hike at the end of July triggered volatility across global markets at the start of August. Yet, by month end, most indices had recovered. Read on to learn more about what happened and what it could mean for your investments.

US

At the end of July, the Federal Reserve held rates steady, refusing to confirm or deny whether rates might be cut in September¹. While markets initially seemed unfazed by this, disappointing economic data released at the beginning of August led many to fear that the country could be on the cusp of a recession. The most significant development was a rise in the unemployment rate to 4.3%². This suggested that the labour market might be a more pressing concern for the economy than inflation³.

The data spooked investors, leading to a global share sell-off in the early days of the month. The S&P 500 fell by 7.3% before recovering, the Dow Jones was down by 5.4%, and the Nasdaq fell 10.7% at its lowest for August⁴.

Fortunately, by the end of the month, further data had been released regarding jobless claims which reassured investors. Across the month, the S&P 500 rose 2.3%, the Nasdaq rose by 0.7% and the Dow Jones rose by almost 1.8%⁵.

UK

Early data suggests that UK Gross Domestic Product grew 0.6% in Q2, following growth of 0.7% in Q1⁶. Growth of 0.8% in the services sector offset a small drop of 0.1% in the production and construction sectors⁷.

Inflation rose slightly in July according to figures released in August. The Consumer Prices Index rose by 2.2% in the 12 months to July 2024, up from 2% in June⁸. Prior to these figures becoming available, the Bank of England cut the base rate from 5.25% to 5%, the first cut to the base rate since March 2020⁹.

Stock market returns were positive yet muted for the month. The UK FTSE All-Share rose 0.5% in August¹⁰.

Europe

The summer sporting games in Paris appear to have had a positive effect on the eurozone economy as athletes and spectators visited the city and boosted spending¹¹. Output in the French private sector reached its highest level in 17 months, and the entire bloc felt the positive effects¹².

Despite the increase in spending, early estimates suggest that inflation in the eurozone fell, dropping from 2.6% in July to 2.2% in August¹³.

Eurozone stocks underperformed their US peers, but still finished the month in positive territory. The pan-European STOXX 600 returned 1.3% for the month¹⁴.

Asia

At the end of July, the Bank of Japan raised interest rates to 0.25%¹⁵. This led to the yen strengthening against the dollar at the same time as the announcement of weak US economic data¹⁶. Together, these events contributed to the volatility seen on global stock markets in the first week of August¹⁷. The Japan TOPIX index dropped 12% on 5 August, one of the biggest falls seen this month, and ended the month down -2.9%¹⁸.

Elsewhere in Asia, stock markets outperformed many western and developed market equities. The MSCI Asia ex-Japan index rose 2% for the month, and the MSCI Emerging Markets rose 1.6%¹⁹.

What this means for you

The market volatility in the first week of August might have been concerning, but by the end of the month most indices had recovered their losses²⁰. In fact, just days after the worst trading day in two years, Wall Street experienced its best trading day in two years²¹. On 8 August, the S&P 500 rose 2.3%, which was the index’s biggest single-day increase since November 2022²². Similarly, the Nasdaq Composite rose 2.9% and the Dow Jones rose 1.8%²³.

This reassuring fact provides a helpful lesson in the benefits of taking a long-term view. If you had panicked and sold your investments when markets began to fall, you’d have missed this recovery. This isn’t a unique scenario either. The period between 9 and 18 March 2020 saw three of the best 30 trading days of the past 30 years for the S&P 500 as well as five of the 30 worst trading days²⁴.

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:

FP2024-390

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