Investment market update: October 2024

While inflation is stabilising in many major economies, markets continue to experience some volatility, which may have affected your investment portfolio.

According to the latest International Monetary Fund’s Global Financial Stability Report, markets could be underestimating the risks of conflicts and upcoming elections.

Indeed, the rising price of gold suggests some investors are seeking a safe haven amid news of interest rate cuts, the upcoming US election, and escalating tensions in the Middle East. On 18 October, the price of gold hit $2,700 (£2,083) an ounce for the first time.

Read on to discover what else may have affected your investments in October 2024.

UK

The headline news in the UK in October 2024 was chancellor Rachel Reeves’ delivery of the Autumn Budget – the first from the Labour Party in 14 years.

She announced a raft of reforms, including £40 billion in tax rises to address the “black hole” in the public finances. Among the announcements were changes to Capital Gains Tax, Inheritance Tax, Stamp Duty, and employer National Insurance contributions.

Following the Budget on 31 October, the FTSE 100 – an index of the 100 largest companies on the London Stock Exchange – slumped to its lowest level in almost three months as investors reacted to the updates.

The latest GDP figures released by the Office for National Statistics (ONS) offered some welcome news. After the economy flatlined in June and July, it returned to growth in August and was up 0.2%.

Inflation figures were also positive. The ONS data shows that inflation was 1.7% in the 12 months to September 2024 – the first time it’s been below the Bank of England’s (BoE) 2% target in three and a half years.

The news led to the FTSE 100 rising by 0.65% on 16 October.

Inflation falling paves the way for the BoE to make further interest rate cuts, which would be welcomed by borrowers. Indeed, the BoE hinted that it could be more aggressive with rate cuts in the coming months.

Lower interest rates could boost the property market, and homebuilders benefited from the BoE’s outlook as a result. On 3 October, Persimmon was the top riser on the FTSE 100 after a 3.1% increase. Vistry and Barratt also gained.

Yet, it wasn’t all good news for the housebuilding sector. Just days later, Vistry issued a profit warning and said this year’s pre-tax profits would be around £80 million lower than expected. The announcement led to shares in the company plunging by almost a third.

Data suggests the manufacturing sector is struggling. According to S&P Global’s Purchasing Managers’ Index (PMI), the sector suffered its biggest drop since March 2020 in September. The fall was linked to the Autumn Budget with businesses reportedly taking a “wait and see” approach before making decisions.

Overall, business outlook could be gloomy. Trade credit insurance firm Allianz Trade predicts UK business insolvencies will rise by 5% this year when compared to 2023 to more than 29,000. That figure would be a 12-year high and around 30% above pre-pandemic levels.

However, some businesses are bucking the trend. At a time when many other retailers are struggling, fast-fashion giant Shein’s UK arm reported sales surpassed £1.5 billion for the first time in 2023, up from £1.12 billion in the previous year.

Europe

The eurozone’s key data is similar to the UK.

In the 12 months to September 2024, inflation in the eurozone fell below the 2% target to 1.7%. The news led to the European Central Bank (ECB) cutting interest rates for the third time this year – all key rates were trimmed by 25 basis points.

However, the ECB warned that inflation was expected to rise in the coming months.

PMI data indicates the eurozone economy is stuck in a rut. In October the PMI reading was 49.7 after a slight rise from 49.6 in September – only a figure above 50 indicates the economy is growing.

The manufacturing sector in particular is struggling, with a PMI reading of 45.0, indicating contraction. The bloc’s two largest members are dragging the figure down. Germany recorded its worst decline in factory conditions in 12 months, and France’s manufacturing sector is also contracting.

The UK wasn’t the only country to review taxation in October. According to Bloomberg, Italy’s finance minister said it plans to raise taxes on companies that have benefited the most from the economic turbulence of recent years to bring down the country’s deficit.

In response, Italy’s MIB share index, which tracks the 40 leading companies listed on the Borsa Italiana, fell 1.35% on 3 October.

US

Official figures show inflation in the US continues to near its 2% target when it fell to 2.4% in September 2024.

After recent concerns that the US economy could fall into a recession, job data indicates the economy isn’t weakening and businesses are feeling confident. According to the Bureau of Labor Statistics, the number of jobs increased by 254,000 in September.

The data led to the dollar rising and Wall Street rallying on 4 October. On the back of the news, the Dow Jones Industrial Average was up 0.55%, while the S&P 500 gained 0.75%, and the Nasdaq jumped 1.2%.

Asia

China and the EU continued their trade tit-for-tat, which had a knock-on effect on French spirit makers.

At the start of the month, the EU voted to increase tariffs on Chinese-made electric vehicles from 10% to up to 45% for the next five years. Beijing labelled the tariffs as “protectionist” and, just days later, announced temporary anti-dumping measures on imports of brandy from the EU. France’s trade ministry said the measures were “incomprehensible” and violated free trade.

Among the French companies affected were spirit makers Remy Cointreau and Pernod Ricard, which saw shares fall by 8% and 4% respectively on 8 October.

A Chinese press briefing also affected markets when investors were disappointed that officials didn’t announce any major stimulus measures. On 9 October, the Shenzhen Composite Index tumbled by 8.2% – its biggest fall since 1997 – while the Shanghai Stock Exchange lost 6.6% and the benchmark CSI 300 fell by 7.1%.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.