2024-10-28

3rd quarter 2024 market overview

The third quarter of 2024 was characterised by high volatility in stock prices, but by the end of the quarter the major US indices reached new records.

The quarter started on a positive note, but fears of an economic slowdown and a possible recession led to a fall in share prices in the second half of July. Investors subsequently reacted positively to the US Federal Reserve’s (Fed) base rate cut, which began in mid-September with a cut of as much as 0.5 percentage points. It is important to note that, in euro terms, the S&P 500 index of US equities rose by only 1.8% over the quarter, as a large part of the rise was eaten up by the weakening of the US dollar against the euro. The market’s rise, which was previously concentrated in the Magnificent 7, has recently moved to the broader market. Small-cap shares have appreciated significantly. In individual sectors, real estate companies, which are particularly sensitive to interest rates, have appreciated significantly.

Weak US labour market readings (the unemployment rate was 4.3% in July against market expectations of 4.1%) and general concerns about the state of the economy strongly influenced the Fed’s rhetoric and investors’ expectations about the pace of interest rate cuts. Also, falling inflation (2.5% in the US in September) gave additional hope that the period of strong price increases was over. As a result of these factors, the Fed started its rate-cutting cycle in September, cutting interest rates by as much as 0.5%. The European Central Bank also carried out a second rate cut by a standard 25 basis points.

As volatility in equity markets increased, geopolitical risks increased and interest rates started to move downwards, the gold price shot up. Demand from the “Global South” circle of countries also contributed to this, as they increased their purchases of gold for their national reserve funds in order to reduce the weightings of the US dollar and the euro in them.