In this market update, Integrity365 Independent Financial Adviser, Douglas Sims, looks back on key activity over the last month.

September was a relatively quiet month for stock markets in comparison to the previous few months and even years. Although valuations initially fell after a difficult start to the month, they rebounded following positive interest rate news.

The best performing index, without a doubt, went to the CSI 300 index (the top 300 listed companies on the Shanghai Stock Exchange), changing from one of the worst performers this year (-8% at its worst on September 13th) to one of the best, recording a stunning 27% turnaround in just nine trading days. This is the best performance from a major index going back to 1980. But how? Following months of negativity surrounding the Chinese economy, and particularly their beleaguered property sector, the People’s Bank of China announced a significant stimulus package lowering borrowing costs whilst simultaneously injecting more funds into the economy.

In August, investors feared the US economy was slowing and potentially heading towards a recession to which The Federal Reserve admitted it was a little ‘behind the curve’ when it comes to cutting interest rates. However, in September the Fed caught up with a cut in interest rates of 50 basis points underlining their support for the economy and pre-empting any weakness. This surpassed the anticipated 25 basis point cut and will result in lower borrowing costs for both companies and consumers.

In the presidential race, Kamala Harris outperformed during her first political debate with Donald Trump. Whilst this saw her popularity rise in the polls, it remains a tightly fought contest.

The Bank of England retained interest rates steadily in the UK, with Europe following suit by reducing base interest rates by a more modest 0.25% as inflation fell to 1.8%.

Tensions rose in the Middle East as Israel focused its attention on Hezbollah and Lebanon. This situation represents a significant risk to stock markets, especially if Iran were to be dragged into a direct conflict with Israel (supported by the US). Market observers are closely monitoring the price of oil, as any disruption will undoubtedly feed through to energy prices and could bring a revival in inflation. This would pressure Central Banks to hold interest rates at current levels restricting their support for the economy.

Despite the risks within the global economy, stock markets have managed to avoid these obstacles so far, with performance figures over the last 12 months proving terrific in response. However, much like the US economy, experts believe a more modest growth level can be expected for the coming months. 

Attentions within the UK will now also turn to the forthcoming Autumn Budget, and any such impact this may have on markets.

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. 

Author: Douglas Sims, Integrity365

Published: 11th Oct 2024