Your July and August 2024 global market update

Last time, we reported that market indices in the UK, US, Europe, and Asia had seen upticks across the board in May and June 2024.

Looking back over July and August, the same indices have proved positive in many cases but are experiencing an overall lag in gains, as you can see below.

Source: JP Morgan. Data reflects market movements between 1 and 31 August 2024.

Keep reading to discover the key events behind the above figures.

UK

Of course, the major UK event in this period was the general election, held on 4 July, that saw the Conservative party voted out and replaced by a Labour government.

After Labour’s landslide win, Schroders reports that equities performed extremely well in July. For instance, the FTSE 250 ex investment trust rose by 8%. Fresh hopes for a recovering economy may have boosted investor confidence, with 36% of Chief Financial Officers (CFOs) saying now is “a good time to take on risk”.

However, Chancellor Rachel Reeves soon announced that the Conservatives left a “£22 billion black hole” that will need to be filled by potentially severe measures. Certain taxes, including Capital Gains Tax (CGT), are likely to be raised in the Autumn Budget on 31 October.

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Election news aside, the Office for National Statistics (ONS) reports inflation rose by 2.2% in the year to August 2024, up from the Bank of England (BoE) target rate of 2% in June. Election news aside, the What’s more, the BoE implemented its first base rate cut in four years, bringing the rate down to 5%.

Plus, the ONS says UK unemployment was below expectations between May and July, standing at 4.1%, but it had decreased in the previous quarter.

US

Political news was near constant from the US in these two months.

In July, consumers and media outlets became concerned about the cognitive health of President Joe Biden. In August, Biden officially stepped down as the Democratic nominee and was usurped by Vice President Kamala Harris.

This news was embroiled with news of an attempted assassination of former president and Republican nominee, Donald Trump, who was shot in the ear at a rally on 13 July.

The immediacy of these events was reflected in US markets, which saw sharp downturns at the start of August, but as you read in the table above, the S&P 500 recovered by the end of the month. However, as the election inches closer, it may be that further volatility ensues over the short term.

Plus, in August, Schroders says that the US labour market has “cooled” with only 114,000 jobs added in July, falling short of the 175,000 forecast.

The good news is that according to Schroders, the US economy grew by 2.8% in the second quarter of the year, and annual inflation stood at 3% in June. Plus, smaller companies performed favourably in July as it’s expected that the Federal Reserve (Fed) will cut interest rates soon, benefiting smaller businesses.

Eurozone

The MSCI Europe ex-UK index reported a 1.4% gain in August. As with the UK and US, the expectation of interest rate cuts by the European Central Bank (ECB) are fuelling confidence in consumers and investors alike.

In August, our discretionary fund manager (DFM) Brooks MacDonald reported that globally, “Inflation data keeps markets on edge”, arguing that inflation and interest rates are likely to have a distinct impact on markets in the coming months.

What’s more, GDP growth is somewhat touch-and-go in the eurozone. While overall European growth was 0.3% in Q2 2024, Schroders says, Germany – a major economic player in the region – reported recessionary conditions of -0.1%.

Asia

Japan’s Nikkei 25 index saw its biggest drop since 1987 in August, causing the Japan TOPIX – an index that has performed extremely well in the last two years – to end the month on a negative return.

This was sparked by the Bank of Japan (BoJ) raising interest rates to curb rising inflation, CNN reports, combined with the bubble of Japanese technology stocks beginning to burst.

This said, as the Guardian reports, the day after the Nikkei 25 plummeted, the index recovered with a record surge that rewarded patient, cool-headed investors.

Outside Japan, markets were more stable, with the MSCI Asia reporting a 2% gain in August.

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Please note

This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.