Q3 Global Equity Market Wrap

Taking a look at global equities for the third quarter of 2024, it was a very volatile and eventful quarter.

It's a long list, but very important.

We had a weak CPI print in July, change expectations for Fed rate cuts.

We had increasing concerns that the strength in that AI sector, notably Capex would be weak going forward, creating a lot of weakness in momentum stocks and AI exposed companies.

We had increased escalation of the war in the Middle East.

We had Japanese monetary policy create a very large rush of capital back to Japan, forcing sale of offshore assets known as the Japanese yen carry trade.

We had notable Chinese stimulus.

We also had a Fed rate cut of 50 basis points.

And when it comes to the US presidential race, we had Biden drop out and attempted assassination on Trump.

That's a very long list.

There's a lot of worries in that list.

But we actually had markets up close to 6% in U.S. dollar terms and global equities up close to 3% in Australian dollar terms.

What was notable to us during the quarter was actually the change of leadership.

What I mean by that is the sectors that had previously been the strong outperformers in IT and communication services were actually underperformers.

And the two best performing sectors that were very strong were actually real estate and utilities, both sectors benefiting from either lower interest rate expectations, but also the market rotating to a bit more of a defensive posture.

When we look under the covers, one of the very big laggards over recent years has actually been emerging markets.

And it was quite notable that increased expectations for Fed rate cuts actually meant that Emerging Markets outperformed, but also got a further boost from the Chinese stimulus we saw late in the quarter.

So China and Hong Kong equity markets up more than 20%, helping emerging markets outperform during the quarter.

Under the covers though, one of the biggest top-down changes in leadership was actually quite distinct our performance from value and also from small-caps.

And up until this point, it's been very much a growth equity and larg- cap market.

So a lot of volatility markets moving higher.

But as we look forward, all attention is on November when we see the US presidential election result and we'll continue to just observe what that means for volatility.

But overall, we are expecting a divided Congress, which should mean more of status quo for equity markets.
 

Additional Information

Unless indicated otherwise the source of all market data is sourced from Bloomberg Finance LP, as of 30 September 2024.

Unless otherwise specified, any Global Equity Markets, Regional & Sector Returns are defined as MSCI All Country World Index (in USD).

China stock market defined as MSCI China Index.

Hong Kong market defined as Hang Seng Index.

Basis point: One basis point (bp) equals 1/100 of a percentage point (1 bp = 0.01%, 100 bps = 1%).

CPI: Consumer Price Index.

Capex: Capital Expenditure.

AI: Artificial Intelligence.
 

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