Alternatives
Alternative opportunities Q4 2024
Alternative Opportunities is a quarterly report from Invesco Solutions. In each new edition, we look at the outlook for private market assets.
21 October 2024
Market Update
Monthly Market Roundup
8 October 2024
Key takeaways
Eurozone inflation drops below 2% target for the first time in three years.
S&P 500 hits record highs as investor confidence grows following Fed rate cut.
China's stimulus measures boost markets, with strong recovery in consumer sectors.
Summary of markets in September
In September, European equity markets declined amid slowing economic data, with eurozone inflation dipping to 1.8%. The US Federal Reserve’s 50 basis point rate cut boosted bond markets, while Asian equities rallied, particularly in China, following new stimulus measures. Emerging markets saw strong performance, led by gains in Chinese stocks, while Indian equities benefited from domestic reforms. However, Korea lagged due to falling technology stocks.
European equity markets gave back some of the previous month’s gains as macro data pointed to a slowing economy. They underperformed other regions, especially China, which benefited from stimulus measures.
Germany and Spain fared well, but French equities lagged due to potential tax hikes. Real estate, materials, and utilities had positive returns, while healthcare, technology, and energy struggled due to lower oil prices.
Eurozone inflation fell to 1.8% in September, and Germany's economy showed signs of heading into recession.
The UK equity market declined in September, driven by weak economic data and concerns about the upcoming budget. Inflation remained at 2.2% in August, with rising services inflation offset by lower fuel and hotel prices. The Bank of England held interest rates at 5.0%, with inflation easing and a 0.25% rate cut anticipated in November. Wage growth continued to slow as employment and job vacancies both declined.
US equity markets posted positive returns as the S&P 500 hit record highs, driven by hopes that the Federal Reserve's (Fed) 50bps rate cut would support the economy. Consumer discretionary and utilities sectors led, while energy and healthcare lagged.
Fed Chair Jerome Powell emphasised the economy's strength and defended the rate cut as proactive. Inflation moved closer to the 2% target, and US jobs data showed mixed results.
The US Composite PMI (Purchasing Managers’ Index) rose to 54.6, indicating continued private sector growth, led by services.
Asia Pacific equity markets performed well, with Chinese markets rallying on stimulus measures from the People's Bank of China (PBoC), including interest rate cuts and property market support.
Korean equities lagged, as technology stocks, led by Samsung Electronics, fell. Taiwan's financial stocks led gains after benefiting from China's stimulus and the US Federal Reserve's rate cut.
Indian equities rose, supported by financials and consumer goods, while Japanese markets fell due to political uncertainty. Australian equities advanced, driven by miners, as China's stimulus boosted the materials sector.
Brazilian equities fell as the financial sector lagged, with rising wages fuelling inflationary pressures. Brazil's central bank raised interest rates to 10.75% for the first time in two years.
However, the materials sector rallied on China’s stimulus package, boosting demand for global commodities.
Meanwhile, Mexico saw gains in materials and industrials, although the Peso weakened after cautious remarks from Fed Chair Powell.
Bond markets delivered positive returns as the US Fed cut its benchmark rate by 0.50%, lowering the federal funds rate to 4.75-5.0%. US Treasuries returned 1.22%, while German bunds matched this on rising expectations of European Central Bank (ECB) rate cuts.
UK gilts gained just 0.04% due to sticky services inflation. The US treasury yield curve exited its inversion, and corporate bonds performed well, with US investment-grade bonds returning 1.72%.
High-yield bonds also saw gains, with spreads tightening across both US and European markets.
Read previous editions
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Investment risks
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The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
Important information
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Views and opinions are based on current market conditions and are subject to change.
This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.
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