Q2 Market Commentary 2024

Over the second quarter of 2024, investor focus has remained on inflation and interest rate policy on each side of the Atlantic. Artificial Intelligence has remained at the fore, becoming increasingly prominent in companies plans. While economies globally look fairly robust, corporate businesses and consumers are continuing to see easing of inflationary pressures. Geopolitical events have caused some concern and elections remain significant in the West.

The domestic market

The UK market was up 3.8% over quarter two as measured by the MCSI UK IMI index. Inflation fell back to the target of 2% in June, however services remained higher than hoped, which will likely delay potential interest rate cuts. After the period end in early July, the UK elected a new Labour Government. As ever, there are various opinions as to how this will impact our marketplace. We are keeping a close eye on the details as they are announced, taking a sensible yet proactive view as the information unfolds.

What about the USA?

In the USA, equity markets remain strong and returns from other areas are broaden out from what was predominantly the Information Technology space. Market sentiment remains positive, earnings met expectations and the inflation/interest rate narrative appeased investors. As the quarter progressed, markets started to price in fewer rate interest rate cuts as the Federal Reserve (‘FED’), reaffirmed its expectation for the year. It will cut rates should it see stronger evidence of the more resilient areas of inflation coming down further.

What’s happening in India?

In India, Prime Minister Modi was re-elected for the third term, albeit with a reduced majority, which is likely to mean some compromises with other parties in terms of policies. The longer-term structural changes remain in place.

ASAM’s outlook

Considering the long-term investment outlook, we are focusing on fundamentals and companies that have the ability within their business models to adapt to the current market conditions and which are possibly more robust to unforeseen change.

Over the last twelve months there have been lots of indiscriminate moves in markets, sectors, and individual companies. While we feel the rate cycle has now likely peaked in the US, UK and Europe we cannot rule out further volatility in the short term. Many market changes are reactionary and occur without long term consideration of how individual companies are performing and adapting to the economic environment. It is worth remembering that some of the most successful businesses globally took decades to become the household names they are today.

Corporate earnings so far remain supported and, encouragingly, the US consumer remains in good shape. Employment levels in the US remain a key focus as the job market tightens. We do not envisage a deep recession in the US but will continue to closely monitor economic developments.

This information is obtained from sources considered reliable, but its accuracy and completeness is not guaranteed by Anderson Strathern Asset Management Limited. Neither the information nor any opinions expressed constitute financial advice. Investments can fluctuate in price, value and/or income and may return less than the original amount invested. Past performance is not necessarily a guide to future performance. Anderson Strathern Asset Management Limited is authorised and regulated by the Financial Conduct Authority.

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