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The Week In Markets – 11th January – 17th January 2025

We are 17 days into the new year and historically the number 17 means the “manifestation of positive outcomes” and “complete victory”. This has definitely been a more positive day and week in markets, and there is certainly the prospect of a positive outcome in ceasefire talks between Israel and Hamas. Economic data this week was mixed however, with some data from the UK particularly underwhelming.

US Headline inflation (year-on-year) was reported at 2.9%, almost 1% above the US Federal Reserve’s target of 2%, aligning with the Fed’s projections for fewer rate cuts over the year. A positive note is that core inflation (excludes food and energy prices) for December dropped to 3.2% after remaining firm at 3.3% for three consecutive months. In just three days, Mr Trump will begin his second stint in the White House, and the continued threat of tariffs on imported goods and mass deportation of immigrants are seen as acts that could further raise inflation. The US Fed will be patient to see how the start of the year unfolds but has already projected a shallower rate cut path, with no rate cut expected in the January meeting.

We will remain in the US where we cover retail sales, which rose 3.9% (year-on-year) in December. Miscellaneous store retailers, which include gifts shops and florists, saw an increase of 4.3% due to the Christmas period, whilst sales of sporting goods, hobby and musical instruments jumped 2.6% and furniture stores sales rose by 2.3%. Continued consumer strength is being driven by strong wage growth, and markets also sense consumers may be rushing to purchase goods in anticipation of the Trump tariffs, which ultimately raise prices for consumers.

You may be reading this report on your Apple iPhone, but if the report reaches China it’s likely they’ve switched their iPhones out for local rivals Vivo or Huawei. 2024 was Apple’s worst year for iPhone sales in almost a decade, as Vivo captured a 17% market share, closely followed by Huawei with 16%. Artificial intelligence certainly played a role – or in Apple’s case the lack of it- as the latest iPhones sold in China have no access to ChatGPT, forcing Apple to negotiate with China’s domestic companies to integrate AI features.

In the UK, inflation (year-on-year) bucked the recent rising trend and fell to 2.5% for the month of December. A significant positive for the Bank of England (BoE) to consider is the fall in services inflation from 5% in November to 4.4%, the lowest level in 33 months. We reported last week that yields had risen as high as 5.47% (long-dated bonds), the highest since 1998, but have since fallen. The steep fall in yields this week has boosted government bond prices and will ease some pressure on Rachel Reeves.

UK GDP figures for November were released the day following the inflation report, showing positive economic growth of 0.1% (month-on-month) after declines in September and October. Market forecasts had predicted a 0.2% rise in GDP, reflecting the continued gloomy mood over the UK economy since Chanceller Rachel Reeves’ autumn budget. Rachel Reeves did speak following the report, pledging she was “determined to go further and faster to kickstart economic growth”.

UK Retail sales for December is the latest data we have, released this Friday morning, and it surprised by falling -0.3% (month-on-month). Market expectations were for a 0.4% monthly increase, especially with a Christmas bounce; however, this did not materialise as consumers pulled back on food spending. Poor retail sales, weaker than expected economic growth, and the fall in inflation, including services inflation, could provide the BoE with an opportunity to cut rates in their first meeting of the year in February. It appears that bad economic news is good news for markets, as UK equities rose this week. The large cap index is now a whisker away from all-time highs and the mid-cap index advanced over 2.5% on Wednesday following the positive inflation data.

At a company level news broke on Friday morning that Rio Tinto and Glencore had held discussions about a potential merger. While talks are no longer active, there is potential for a deal to be done later in the year. Any merger would be the largest ever in the mining industry.

As we look out to next week all focus will be on Trump’s inauguration on Monday. He has promised strong action, from tariffs to tax cuts, to even trying to buy Greenland! It will be interesting to see what he can actually implement, and how markets will react.

Nathan Amaning, Investment Analyst

Risk warning:  With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.

The Week In Markets – 4th January to 10th January 2025

Any hopes of easing into the new year were swiftly dashed, as concerns around inflation re-emerged, leading to a spike in volatility in bond and currency markets. While the sell-off in bonds was global in nature, the UK was hit particularly hard, which will make for unpleasant reading for the Chancellor, Rachel Reeves.

UK government bond yields have been steadily rising over December and spiked this week, with longer-dated bonds selling off the most. This now means long-term borrowing costs for the UK are now at levels not seen since 1998. It seems the sell-off has been driven by dual concerns around sticky inflation and slowing economic growth. The market now only expects the Bank of England (BoE) to cut rates twice this year (due to inflation) and there are also expectations of lower tax revenues due to lacklustre growth. For the Chancellor, there is a now a risk that she will breach her own fiscal rules, and this could lead to either further tax increases or spending cuts, in order to help balance the books. Sterling fell in tandem with government bonds this week, falling to a 14-month low versus the US Dollar. UK large cap equities actually rallied during the week, most likely in reaction to the lower currency, which should boost overseas earnings (when translated back to sterling). The mid-cap index, which is typically more domestically focused, dropped close to 2% on Wednesday, led by consumer stocks. If interest rates stay higher-for-longer, there will likely be a negative impact on the consumer (in part due to higher mortgage rates), who could see disposable incomes dented.

On Monday there were reports that Donald Trump and his team were considering scaling back their tariff plans, however, this was quickly dismissed with Trump tweeting this was “fake news”, causing equity markets to wobble on Monday afternoon. The market views tariffs as an inflationary policy and this has helped to push inflation expectations higher in the US, forcing US government bonds to sell-off this week, approaching levels not seen since November 2023.

With inflation concerns once again coming to the fore, there has been a different equity market leadership in 2025 compared to 2024. Sectors such as oil and gas, mining and financials have led the way, sectors that feature prominently in UK indices, but are light in US indices, which are heavily exposed to technology. If inflation concerns persist, then investors will need to consider their asset allocation. In 2022, when we saw inflation and interest rates rise, the UK large cap index outperformed the US equity index by a staggering 29%. At this juncture, we think diversification in portfolios is important, with inflation strategies, such as resources and gold included in the asset mix.

Inflation is certainly not a concern in Switzerland where prices fell over the month of December and headline inflation is a meagre 0.6%. This low level of inflation has allowed the central bank to cut rates to 0.5%. Deflation seems the biggest concern in the world’s second largest economy, China, with the latest inflation print at 0.1%. There are real concerns that China is going down the same path as Japan did 30 years ago, with similarities being made due to demographics, an ailing property sector and elevated private debt levels. The concerns have led to Chinese equities falling over 5% in 2025.

The gold price proved resilient throughout the weak, despite the increase in real yields. It is back approaching $2,700 an ounce, close to its all-time high. As commented on last week, oil has been moving higher in 2025. Brent crude oil is approaching $80 a barrel and this will feed into the upcoming inflation data.

The week finished with the most important economic data, the US Non-Farm Payrolls data, which showed 256,000 jobs had been added to the economy, while unemployment dropped to 4.1%. Both data points beat expectations, leading to investors believing the US economy is strong, and that the US Fed will likely be very slow and steady in future rate cuts. US government bonds sold off on the news, and US equities look like they will open lower.

The mood music has changed so far in 2025, inflation concerns have bubbled to the surface and the optimism of deep rate cuts in 2025 has diminished. Within the portfolios exposure to resources, which struggled in 2024, are now leading the way, highlighting the benefits of diversification and blending holdings that perform in different environments.

Andy Triggs, Head of Investments

Risk warning:  With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.

The Month In Markets – December 2024

The Month In Markets - December 2024

The ‘Santa Rally’ phenomenon failed to ignite this year, despite much optimism that November’s market strength would continue into the year-end. Despite a weaker month, it has generally been a positive 2024 for risk assets.

One asset class that has struggled this year is government bonds, and December was no different. During the month we saw many prominent central banks meet for one final time in 2024 to set interest rate policy. While the interest rate decision was important, just as pertinent was commentary around the outlook for next year and hints about the likely path for interest rates.

Starting with the US Fed, as expected the committee voted to reduce rates by 25bps (0.25%). This was the third rate cut this year, bringing the total reduction to 1%. Despite lowering interest rates, it soon became clear that the US Fed is still nervous around inflation, with potential Trump tariffs and a strong economy likely to put upward pressure on prices. The US Fed now only expect to reduce interest rates by 0.5% in 2025. The hawkish commentary from Fed Chair Powell led to US government bond yields rising (prices falling). Some investors have questioned whether the US economy really needs any interest rate cuts given its strong economic growth, and as such there are concerns that inflation could rear its head again due to loose policy.

It wasn’t just the US Fed cutting rates in December, with a raft of other central banks lowering their headline interest rates. The European Central Bank (ECB) delivered their fourth cut of the year, while the Bank of Canada delivered a bumper 0.5% reduction, bringing their headline rate to 3.25%. Another central bank that decided on a jumbo cut was Switzerland, which now means their interest rate is only 0.5%. Interestingly, the Swiss Central Bank hasn’t ruled out the possibility of negative interest rates. Overall, 2024 has seen a shift away from interest rate hikes towards cuts and this is expected to continue into 2025.

One nation that bucked the trend in December was the UK. The Bank of England (BoE) met and decided to pause their recent cutting cycle, leaving headline interest rates at 4.75%. Six committee members voted to maintain the current level of rates, while three members voted for a 0.25% reduction. The decision seems to have been influenced by a range of factors, including the latest inflation data, which showed headline inflation at 2.6%, up from the lows of 1.7% in September. UK wage growth came in at 5.2%, higher than expected which also influenced the BoE’s decision.

On a forward-looking basis, there is the expectation that many UK companies will raise prices in 2025 to offset the recent National Insurance tax increases introduced in the October budget, which will be inflationary. One factor that might prompt the BoE to cut rates more aggressively in 2025 is the state of the economy. The latest economic data has been disappointing and pointed towards a sluggish economic backdrop. GDP data for Q3 was revised down to zero, and the economy is expected to have shrunk in the October (data released in December). This will make for grim reading for the Labour government, who pushed hard on a narrative of economic growth. It is still early days, and it will be interesting to see how data unfolds in 2025.

Over the course of December, UK government bond yields rose, with longer-dated bond yields rising above 5%. This now means that long-term UK borrowing costs are at the highest level in 26 years.

There was a different trend in China, where the yield on the sovereign one-year bond fell below 1% for the first time since 2009. The falling bond yields reflect concerns around China’s economic growth outlook, coupled with the expectation of a significant policy response in effort to kickstart their economy and boost consumption.  Inflation in China fell to 0.2%, which was lower than expected and driven in part by a weak consumer and domestic demand. Retail sales were up only 0.16% for the month of November and a range of PMI data was soft. It’s clear the Chinese authorities have a huge task on their hands in turning round the fortunes of the world’s second- largest economy.

At a stock market level there were some interesting dynamics at play. In the US, growth- orientated companies led the way, while some of the cheaper, unloved companies lagged. One of the main US equity indices, which has limited exposure to technology companies, closed down for 11 consecutive days, something we have not witnessed since 1974. There was significant dispersion in the US market, with the tech sector performing strongly, while areas such as infrastructure lagged.

At a currency level we saw Sterling weaken by around 2.5% versus the US Dollar. The trend for the month was one of US Dollar strength. With Trump’s inauguration in January and no sign of a cut to the huge budget deficit there could be potential headwinds for the greenback currency as we head into 2025.

The narrowness of the market in December made it a challenging month for diversified multi-asset portfolios. However, we continue to believe a genuinely global approach, diversified across asset classes, sectors and investment styles is a sensible approach in order to manage risk, smooth returns and preserve and grow capital over the long-term.

Andy Triggs

Head Of Investments, Raymond James, Barbican

 

Appendix

5-year performance chart

Risk warning: With investing, your capital is at risk. Opinions constitute our judgement as of this date and are subject to change without warning. Past performance is not a reliable indicator of future results and forecasts are not a reliable indicator of future performance. This article is intended for informational purposes only and no action should be taken or refrained from being taken as a consequence without consulting a suitably qualified and regulated person.

Investment Strategy Quarterly – January 2025

Our first Investment Strategy Quarterly of 2025 brings insight and opinion including 10 themes to watch out for in the US this year, what we think we might expect from Trump 2.0, potential effects on the energy market as focus moves from geopolitics to the electric grid, what we know (and don’t know) about uncertainty, plus where (and how) there may be economic growth this year.

Read all this and more in Investment Strategy Quarterly: 2025 Outlook

The Week In Markets – 28th December 2024 – 3rd January 2025

Happy New Year! This week we transitioned into 2025, the year of the snake according to Chinese astrology, which is associated with growth and transformation. Although Chinese New Year doesn’t fall until the end of the month, investors will be hoping for strong growth and positive economic transformation throughout the year.

It has been a truncated week for most major markets, with exchanges being closed in observation of New Years Day. A late santa rally in the US failed to ignite this week, with equities falling throughout the week. Trading volumes are typically thin during holiday periods, and there was potentially an element of profit taking into year-end given the strong gains made during 2024.

Economic data from the US was very light this week. The Chicago PMI data was weak, however, there was more positive data with finalised manufacturing PMI data higher than expected, as well as better than expected weekly jobless data. Given the holiday period, the monthly non-farm payrolls data will be released next Friday, not the first Friday of the month, which is customary. US bond yields were stable this week, after a difficult December. It has been a strange time for government bonds, behaving very differently in this rate cutting cycle when compared to the past. Yields have been rising, despite the US Fed cutting rates by 1% since September; this is a phenomenon we haven’t really witnessed before. As a result of rising yields, mortgage rates have risen in Q4 and are around 1% higher over the period, with long-term mortgage rates back above 7%. This will continue to act as a headwind to the housing market, where transactions remain extremely low. Construction spending disappointed this week and could be a headwind to GDP growth this year.

UK monthly house price data from Halifax showed prices were up 0.7% for the month. Over the course of 2024, house prices rose 4.7% on average, according to Nationwide, with the average price of a home now £298,000. It is hoped that falling interest rates will provide support to the housing market in 2025, although stamp duty changes, which take effect from April, could be a headwind to pricing.

Sterling started the new year in particularly weak fashion, falling over 1% against the US Dollar and Japanese Yen on Thursday. The weaker currency did give a lift to UK large cap equities, with the headline index rising over 1% yesterday.

Chinese bond yields continued to fall this week, moving out of tandem with most major developed market government bonds. The yield on the 10-year Chinese government bond fell below 1.6% this week, for the first time in history. It has been driven by deflationary pressures and stalling economic growth within the world’s second largest economy. It will be interesting to see what policy measures are implemented this year in order to help kickstart the ailing economy.

Gold moved higher at the start of the year, with investors seemingly believing the strong performance in 2024 is likely to carry on. With elevated geopolitical risks, it is seen as a sensible portfolio hedge, something we wouldn’t disagree with. The oil price has nudged higher this week, with Brent Crude back above $75 a barrel. This is in line with where it traded 12 months ago, although a far cry from the $120 a barrel it reached at the peak of 2022.

After a quiet start to 2025 things will become busier with US non-farm payrolls, inflation data and Trump’s inauguration all coming up over the next few weeks.

Andy Triggs, Head of Investments

Risk warning:  With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.

The Week In Markets – 14th December – 20th December 2024

The hope of a Santa Rally was brought to a complete standstill on Wednesday evening following the US Federal Reserve’s meeting. The 25bps (0.25%) rate cut was anticipated by markets; however it was the commentary from US Fed Chair Jerome Powell, that spooked markets.

Wednesday’s meeting marked the final US Fed meeting before Mr Trump’s arrival at the White House. The decision was made to bring interest rates down for the third consecutive meeting to 4.5%. Mr Powell spoke clearly about entering a “new phase”, in which greater caution would be taken regarding further rate cuts, signalling just two cuts in 2025. Discussions around the health of the US economy were positive but caution stemmed from the potential impact of proposed tariffs and policies by Mr Trump. The S&P 500 and Nasdaq fell -2.9% and -3.8%, respectively, on the day. Additionally, Mr Powell shut down talks of a national reserve for cryptocurrencies, triggering a fall in bitcoin, now down -5% for the week.  

It is fair to say the US economy has been resilient over the year, and US retail sales reflect this. In November, retail sales increased more than expected to 0.7%, with motor vehicles sales (2.6%) and online shopping (1.8%) leading the way. Black Friday sales provided the perfect opportunity for an online splurge, but strong retail sales have been underpinned by robust wage growth.

On our home turf, UK wage growth rose more than expected. In the three months to the end of October, average earnings rose by 5.2%. We also had inflation data released on Wednesday, which showed inflation had risen, as expected to 2.6% (year-on-year). The data was released before the Bank of England’s (BoE) meeting and had effectively extinguished any last hope of a pre-Christmas cut.

It was Thursday afternoon when the BoE concluded their final meeting of the year. At the beginning of the year, markets expected four base rate cuts from the 16-year high rates of 5.25% but we have ended the year with just two cuts, leaving rates at 4.75%. Policymakers became more divided as three of the nine Monetary policy committee members – Deputy Governor Dave Ramsden, Swati Dhingra and Alan Taylor – voted for a 25bps (0.25%) rate cut. The BoE has been more cautious than US Fed and European Central Bank, and that cautious approach will not change heading into the new year. Governor Andrew Bailiey stated that the central bank will stick to a “gradual approach” following a recent pick-up in inflation and weakened economic growth. Markets responded negatively, with the FTSE 100 heading for its worst week of the year, down -3% and longer dated UK government bonds yields reaching levels not seen since 1998.

All year we have covered the political crisis that the French have been through, and President Macron has now appointed his fourth premier of the year. Mr François Bayrou, the leader of centralist party MoDem, compared the difficulty of his new role to “climbing the Himalayas”. The imminent task he faces include addressing the huge public debt problem and pushing a budget through that pleases all three divisions in parliament.

Until recently mergers and acquisitions in Japan have been muted, however, we have seen a big rise recently, in part driven by the government’s move to improve shareholder returns and force management teams to be more efficient with their balance sheets. The big news this week out of Japan was a potential merger between Nissan and Honda. Together, they would create the third-largest auto group, valued at $54billion behind Toyota and Volkswagen. The firms agreed on a collaboration in electric vehicle development earlier this year, but both have faced struggles. Nissan shares have risen almost 25% for the week while shares of Honda declined 3%.

December has so far been a tough month, with equities and bonds weakening. Volatility and pull backs are normal in markets, especially after a strong period, and we believe provide opportunities to add to favoured areas.

This is the last weekly round-up of 2024. We would like to wish everyone season’s greetings and a happy new year. We very much look forward to working with you through 2025.

Nathan Amaning, Investment Analyst

Risk warning:  With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.

The Week In Markets – 7th December – 13th December 2024

Not so long-ago US Inflation was seemingly on the mend, as headline inflation fell to a two-year low of 2.4% in September. However, the latest data released on Wednesday showed an uptick to 2.7% in November, showing the battle against elevated inflation is not yet over.

US core inflation (year-on-year) remains stuck at 3.3% for the fourth consecutive month, a level that just won’t seem to budge. The US Federal Reserve will look at the data reports for positives and see that shelter (rent) and services inflation both rose at their slowest pace in almost three and a half years. Despite the increase in headline inflation, markets are almost certain we will see a 25bps (0.25%) rate cut next week from the US Fed but are forecasting fewer cuts in the new year as Trump takes power. 

Elon Musk, the richest man in the world, has become the first person in history to have a net worth of $400bn. Tesla shares have been on a tear since election day and closed at a record high of $424.77 on Wednesday. The upcoming appointment of Mr Musk to government has been quite powerful as investors believe his mission to cut down on regulatory practices ultimately benefits his businesses in the electronic vehicle (EV) sector (Tesla) and artificial intelligence (AI) sector through his companies SpaceX and Neuralink.

The Swiss National Bank responded to the country’s weak inflation data report and the backward step in economic growth with a surprise 50bps (0.5%) interest rate cut. This takes the base rate to 0.5%, the lowest level since November 2022 and surprised markets as they anticipated a 25bps cut. The Swiss Franc weakened against the Euro after the new Chairman, Mr Schlegel, left the door open for further cuts but ruled out the likelihood of negative rates in the future. The Bank of Canada also cut interest rates by 50bps on Wednesday.

Staying on the topic of central banks, the European Central Bank (ECB) cut rates on Thursday afternoon for the fourth time this year. Interest rates are now down from the 16-year- high of 4.5% in April to 3.15%. Commentary from central banks is highly analysed by markets for insights on the future rate path, and the removal of key reference “keeping rates sufficiently restrictive” seemingly indicates an appetite for further cuts in future meetings. This cut was expected, with recent services PMI data dropping below 50 and continued weakness in economic growth.

The UK market has seemingly stalled since the Labour government took power and there was another blow to the London Stock Exchange (LSE) as equipment rental company, Ashtead, announced plans to shift their primary listing to New York. Ashtead, founded in 1984, has been listed on the LSE for the last 38 years but declared the main reason for the move was due to the US being a more natural home for the company, given that 98% of its profits are derived from the US. Shareholders are set to be consulted, and the final decision will be put to a vote, but the intent certainly highlights concerns over how attractive the UK is to investors.

UK GDP figures for October have been released this Friday morning and for the second straight month GDP shrank by -0.1%. The weak economic growth potentially stems from uncertainty over the Labour government’s Autumn budget, as the services sector flatlined and the manufacturing sector continued to decline. Chancellor Rachel Reeves admitted the GDP figures were “disappointing” but maintained the view that Labour has put policies in place “to deliver long term economic growth”.

Markets will certainly not take their Christmas break early as both the US Fed and Bank of England meet next week. We continue to emphasise the importance of diversification within portfolios, as this allows us to avoid being caught out by short term volatility and benefit from long term opportunities.

 

Nathan Amaning, Investment Analyst

Risk warning:  With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.

The Month In Markets – November 2024

The Month In Markets – November 2024

November may have been the most important month of the year, as on the 5th, US voters chose between Republican Donald Trump and Democrat Kamala Harris for the presidency. Ultimately, Trump won, amassing 77 million votes the second-highest tally in American history.

Term two of Trump’s presidency could be unpredictable, as he declared he pulled off “the greatest political movement of all time”. The presidential inauguration will be held on 20th January 2025. However, Trump got straight to work nominating cabinet picks for the Senate and appointing White House advisors. A high-profile selection is hedge fund manager Scott Bessent, who will serve as Treasury Secretary and execute his 3-3-3 plan: cutting the budget deficit to 3% of GDP, boosting GDP growth to 3% through deregulation, and increasing US energy production by 3 million barrels of oil a day. Later in the month, Trump set markets on alert as he stated his intention to impose 25% tariffs on Mexico and Canada as well as additional tariffs on China. Markets believe this strong stance is a ploy to prioritise America in trade talks but if imposed the tariffs will likely have inflationary impacts.

While the US election took centre stage, there was a raft of economic and corporate data during November. The US Federal Reserve’s preferred measure of inflation, personal consumption expenditure (PCE) increased 0.2% (month-on-month) and rose to 2.3% (year-on-year). Core PCE (excludes food and energy costs) showed an even stronger reading at 2.8% (year-on-year). Inflation is still within reach of the 2% target and as such, bets are still on that the US Fed will continue its rate-cutting path when they meet for the final time this year in December.

It was corporate earnings season as Nvidia, the world’s largest company, showcased impressive growth. They announced record revenues of $35bn and net profit margins of 55%, up 7.9% from the previous year. The continued strong performance highlights Nvidia’s dominance in artificial intelligence (AI). However, markets were slightly concerned with the delayed timing and performance of their new Blackwell GPU chips, which were rumoured to be overheating. The company quickly addressed these worries, stating all design issues had been resolved and that demand for the chips has exceeded their expectations.

In the UK, the Bank of England (BoE) cut interest rates by 25bps (0.25%) to 4.75%, marking its second cut of the year. The decision was almost unanimous among policymakers with an 8-1 vote in favour of the cut. The decision was driven by the positive fall in inflation to 1.7% in September. Inflation figures for the previous month revealed an expected spike to 2.3% following the increase in the energy price cap by 10% to £1,717 on average. Given the recent pickup in inflation and the expected inflationary impact of the Autumn Budget, the market is not anticipating a rate cut at the next BoE meeting.  

The Labour governments budget was announced on the 30th of October, but the effects were felt before and after as speculation over which taxes would be increased led to UK businesses and consumers to hold back on spending. UK businesses will bear the brunt of increased national insurance tax. Retail sales suffered in the build up to the budget as they fell to -0.7%, however we can expect to see a rebound as consumers took advantage of Black Friday shopping on the last Friday of the month.

Over the month, Japan’s economy showed signs of a modest recovery. Q3 GDP was positive at 0.2%, the second consecutive positive quarter and inflation fell to 2.3% (year-on-year). The Japanese government also announced a significant stimulus package worth $140bn which includes energy & fuel subsidies in addition to cash handouts for low-income households. Japan’s Prime Minister, Mr Shigeru Ishiba, who has only been in power since 1st October, has made a bold promise to spend 10 trillion yen through to 2030 to boost Japan’s semiconductor and artificial intelligence sectors, helping the nation regain its technology edge.

Bitcoin made the most remarkable move over the month, gaining nearly 40% and closing at highs of $99,000. The rally was kickstarted by Trump’s strong views on deregulation and also his comments on potentially creating a bitcoin reserve. A new DOGE team has been created, not the cryptocurrency but the Department of Government Efficiency, led by the richest man in the world, Elon Musk. The primary goals are to reduce wasteful government spending and eliminate unnecessary regulations.

To summarise the month of November there was a range of political and economic developments that shifted markets. US equity markets benefitted the most as Russell 2000 (US Small Cap) rose almost 11%. The US Federal Reserve and Bank of England both cut rates, but markets are split on whether both central banks (or just one) will make the final rate cut of the year in December.

Nathan Amaning

Investment Analyst, Raymond James, Barbican

 

Appendix

5-year performance chart

Risk warning: With investing, your capital is at risk. Opinions constitute our judgement as of this date and are subject to change without warning. Past performance is not a reliable indicator of future results and forecasts are not a reliable indicator of future performance. This article is intended for informational purposes only and no action should be taken or refrained from being taken as a consequence without consulting a suitably qualified and regulated person.

The Week In Markets – 30th November – 6th December 2024

The countdown to Christmas has begun as we entered the final month of the year. The Santa rally has taken off early as the S&P 500 has now notched its 50th all-time high of 2024.

British house prices rose by 3.7% in November (year-on-year) reflecting the largest rise in exactly two years. The Bank of England (BoE) also reported the most mortgage approvals by lenders in the last month since August 2022. The increased housing activity stems from the Labour party’s decision to end stamp-duty reliefs at the beginning of the new tax year in April 2025, bringing forward house buyers purchases and hence boosting house prices in the short term.

In just twelve days, the BoE will meet again for the final time this year to decide whether a pause is needed in their rate-cutting path. Inflation figures for November will be released the day before the meeting, and the BoE will fully consider other leading indicators. Firms are reacting to the national insurance tax rises and may raise prices instead of cutting jobs, which would be inflationary. BoE Governor Andrew Bailey remained coy on their next move stating there was still “distance to travel” to control inflation.

The European Central Bank will meet next Thursday and has already cut interest rates three times since June. Finnish policymaker Olli Rehn has spoken ahead of the meeting, explaining the increased justification he sees for cuts. He pointed out weakening economic growth around the Eurozone and rising inflation, which is still within touching distance of the 2% target.

After the debacle over the French budget last week, it was expected that Premier Michel Barnier would be forced out of parliament. On Wednesday, 331 French members of parliament voted no confidence, forcing Barnier’s resignation. His tenure, beginning only four months ago is the shortest of any premier in 66 years. President Macron must act quickly in his search for a new prime minister, one strong enough to push a new 2025 budget through a deeply divided government.

Across the Atlantic ocean, US services sector PMI’s slowed to 52.1 for November following strong results over the previous months of September and October. A figure above 50 means the sector remains in the expansionary zone, which is certainly a positive reflection on the US economy. On Wednesday the US Fed released the last beige book for the year, which provides insight into economic conditions across the twelve federal districts. The takeaway from the report is that economic growth was stable and growing across most districts; however, businesses were uneasy about the incoming tax and regulation that will be implemented in the New Year as Trump takes the hot seat. 

US non-farm payrolls was released this Friday afternoon with 227,000 jobs added in November. This shows a rebound from the 36,000 jobs in the previous month which was heavily affected by the strikes and hurricane Milton that passed over Florida.

We’ve previously written about the artificial intelligence company Super Micro Computer, as they are late in filing their annual and quarterly earnings reports. Their previous auditors Ernst & Young, resigned in October following this however a special committee announced this week “no findings of fraud or misconduct”. This news led the share price rally of almost 25% over the week, however the company is not out of the woods yet. Super Micro’s new auditor, BDO has yet to certify the company’s earnings, and the company is on the timer to deliver their financial reports or face being delisted from the Nasdaq.

We expect next week to be as busy as this week, with inflation reports from the US and Germany, UK GDP and central bank decisions from the European Central Bank and Canada. A given possibility may be the continued rise of Bitcoin as it breached the $100,000 mark on Thursday, up almost 3% for the week.

Nathan Amaning, Investment Analyst

Risk warning:  With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.

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