Q3 Market Commentary 2024

Over the third quarter, markets on the whole continued to perform well. As central banks reduced rates, the fixed income markets and sectors sensitive to interest rates appreciated in value. Over the period, the European Central Bank cut rates by a further 25bps, and the Bank of England started with a rate cut of 25bps. The Federal Reserve (FED) in the US joined in with a 50bps cut. As the largest economy, the significance of the US rate is pivotal. The market consensus has switched its FED outlook to growth, as inflation is now felt to be under control.

The domestic market

The UK market was up 2.3% over quarter two as measured by the MCSI UK IMI index. Inflation continues to be close to target with the slight exception of services inflation. Overall, corporate earnings remain resilient, while mergers and acquisitions have picked up this year from a variety of sources, proving value within the UK market, and flows from overseas have started to return.

What about the USA?

US equity markets have remained strong over the period. Returns from other areas with more rate sensitivity have also picked up with strong performance among the real estate, industrials and utilities sectors. Corporates continue to produce stronger earnings than forecasts and forward expectations remain higher, the market returns continue to broaden out, but we remain conscious of some of the risks within the economy.

What’s happening in China?

Towards the end of the quarter, we also saw a large amount of both monetary and fiscal stimulus in China, which aimed to restore consumer confidence after a challenging period for the real estate sector. While GDP growth still looks strong on a relative basis, the Chinese government has decided to increase the stimulus which should provide a boost to the markets, there is more expected, but these measures take a while to impact the real economy.

ASAM’s Outlook

We continue to scrutinise the investment outlook for the long-term. Our focus remains on fundamental analysis to identify opportunities that have the ability within their business models to adapt to the market conditions. We look to create opportunities that blend asset type and regions that will be robust to current conditions and unforeseen change. Over the last twelve months, there have been lots of indiscriminate moves in markets, sectors, and individual companies. While we feel that central bank rates may reduce among 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 are 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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