In this market update, Integrity365 Independent Financial Adviser, Douglas Sims, looks back on key activity over the last month. After much anticipation for this year’s busy political calendar, July emerged as an encouraging month for investors, following the UK general election and the intensifying US presidential race. 

Whilst stock markets have witnessed severe volatility in the opening weeks of August – which appears to be an overreaction to US Labour market data and fears of a looming recession – global markets have mostly recovered since the 1st of August as these fears ease.

In this update, we will look back on the key developments of July, dominated by the extraordinary scenes we witnessed in global politics.

At the beginning of the month, UK voters flocked to the polling stations, resulting in a sweeping victory for Labour, securing an impressive 412 seats, thus ending a 14-year rule for the Conservatives. The capitulation of the Conservatives was widely predicted and, as such, stock markets were unmoved. We saw inflation data come in at a pleasant – and on-target – 2.0% as the FTSE All-Share index delivered a strong 3.4% return.

Concerns loom as the new Chancellor of the Exchequer, Rachel Reeves, has already begun to lay the groundwork for further tax rises following the announcement of an unexpected £20bn ‘black hole’ in UK finances. Whilst we can only speculate on what could be included within the upcoming budget on 30th October, in advance we will be exploring key topics to consider and review ahead of any possible changes that could affect your personal position.

Later in the month on 13th July,  Republican presidential candidate Donald Trump survived an assassination attempt at a rally in Pennsylvania, highlighting just how divisive US politics has become. Trump’s survival and subsequent rally cry surged his approval ratings and chances of securing the top job.

In response to this, exactly one week later the Democrats finally ended months of speculation regarding Joe Biden’s leadership by endorsing current Vice President Kamala Harris. This was an obvious choice – given US political funding rules – as Harris is set to inherit approximately $100m of funding already raised from the ‘Biden-Harris’ ticket, which may have been returned should they have selected another nominee.

Following these dramatic twists and turns, we have seen the pendulum swing back and forth in US presidential race and it currently stands in favour of Harris. We await to see if this is simply a honeymoon period, or whether she can go all the way to make history as the first female president of the United States.

In stock markets, the S&P 500 gained 1.2% over the month, albeit we saw some significant stock rotation. Investors moved away from the ‘Magnificent Seven’ as they grew more sceptical about the potential for future returns from artificial intelligence (AI), and were underwhelmed by the release of earnings reports from both Telsa and Amazon. However, Small Cap stock returns were up 6.9% over the month.

US Gross Domestic Product grew by 2.8% in the second quarter of 2024 highlighting the strength of the economy. Investors now expect the first Fed rate cut in September and are currently pricing almost three US rate cuts this year, with around 150 basis points worth of cuts by June 2025.

Fixed Interest markets delivered a strong return in July on the back of this data. Confidence grew interest rates would be cut sooner rather than later given hints from policymakers and waning inflationary pressures.

Undoubtedly, July proved a busy month for several reasons but left us encouraging as stock markets press higher.

If you would like to discuss any of the issues covered in this update or explore your own investment opportunities, please do not hesitate to get in touch with a MacDonald Partnership Independent Financial Adviser on 01463 242 242. 

Hear more on ‘Investment Markets & Election Season 2024’ in our latest podcast episode:

Author: Douglas Sims, Integrity365

Published: 16th August 2024