EXANTE Quarterly Macro Insights

Global market indices
Fixed Income
Commodity sector news
Currencies
Cryptocurrencies
What to think about in Q4 2024
Economic and Geopolitical Risk Calendar

Q3 review

Global equities largely gained in the third quarter despite several episodes of extreme volatility. Global markets fell from record highs at the end of July after investors rotated away from large tech stocks in early August and early September following the revision of nonfarm payroll data which prompted fears of a US recession. Markets were further jostled by a surprise rise in Japanese interest rates, which caused a sudden unwinding of the yen carry trade. Tech stocks fell rapidly as doubts arose over the level of returns that companies may see from their significant investment into AI technologies, leading to a sudden surge in the VIX with lower summer liquidity also playing a role. However, despite market fears that the US Federal Reserve had left interest rates on hold for too long, the Fed aggressively cut rates by 50 bps to a range of 4.75% to 5.00% from the 5.25% to 5.50% range it had maintained since July of 2023 in its September meeting, as inflation fell closer to target and weakening jobs data rising unemployment caused it to shift focus to the the other part of its mandate, the labour market.

While equities were particularly volatile in the latter part of Q3, Treasury yields and bond prices rose, benefiting from a flight to safety as geopolitical risks widened and as expectations of interest-rate cuts increased on diminishing inflation. The Fed, the European Central Bank (ECB), the Bank of England (BoE), and other central banks lowered rates amid signs of cooling inflation with the EC delivering its second rate cut in September, taking interest rates to 3.5%, while the BoE finally began its own easing cycle with a 25 bp cut at its August meeting. The exception was the Bank of Japan which raised rates and sparked a rally in the yen.

US Indices for Q3 2024

S&P 500 +5.53% QTD
Nasdaq 100 +1.92% QTD
Dow Jones Industrial Average +8.21% QTD
NYSE +8.27% QTD 

According to the S&P Sector and Industry Indices, 10 of the 11 S&P 500 sectors were in positive territory in Q3. The best performing sector in Q3 2024 was Utilities (+18.46%), followed by Real Estate (+16.29%), and Industrials (+11.15%), where as the Energy sector was -3.12%.

It was a mixed Q3 for the mega caps, as only three members of the Magnificent Seven advanced, Tesla +32.22%, Meta Platforms +13.53%, and Apple +10.63%, while Alphabet -8.95%, Microsoft -3.73%, Amazon -3.58%, and Nvidia -1.70% in negative territory.

In Q3 Energy stocks were -3.12% as concerns over Chinese demand and potential global oversupply hit markets. Major stocks were down such as Occidental Petroleum -18.23%, BP Plc -17.57%, Shell -14.43%, Halliburton -14.00%, Phillips 66 -6.89%, Marathon Petroleum  -6.09%, and Chevron -5.85% in Q3, while Baker Hughes and ExxonMobil advanced at +2.79% and +1.82%, respectively.

Basic materials stocks were +9.20% in Q3. However, performance was mixed with Newmont Mining +27.66%, CF Industries Holdings was +15.76%, Yara International +8.62%, and Freeport-McMoRan +2.72%, while Sibanye Stillwater was -9.48%, Mosaic -7.34%, Nucor Corporation -4.90%, and Albemarle Corporation -0.85%.

European Indices Q3 2024

Stoxx 600 +2.24% QTD
DAX +5.97% QTD
CAC 40 +2.09% QTD
IBEX 35 +8.53% QTD
FTSE MIB +2.93% QTD
FTSE 100 +0.89% QTD 

Expectations for Q3 earnings in Europe have moderated, with consensus estimates now projecting y/o/y growth of +2.6% for Europe and +5.0% for the US. While negative pre-announcements and economic surprises point towards potential weakness, analysts suggest that historically low comparables and reduced expectations may enable companies to surpass immediate hurdles. However, FY 2025 estimates, particularly for cyclical sectors, could face downward pressure given the trend of global GDP growth converging towards normal levels.

European FY 2024 EPS growth forecasts have been revised down to 2.8% from 4.4% in June.  While the upcoming earnings season may generate market volatility, analysts believe that it will not derail the broader cyclical rotation trend if expectations of a ‘soft landing’ persist.

Sector-specific outlooks indicate the strongest earnings growth is anticipated in Utilities, Real Estate, Healthcare, and Financial Services. Conversely, caution prevails for Energy, Mining, Tech Hardware, and Luxury Goods.

Options markets suggest lower volatility expectations for European earnings compared to recent quarters, contrasting with elevated expectations in the US.

Consensus earnings estimates for Q3 suggest that non-US companies, particularly in Europe, are catching up with their US counterparts. Although a performance gap is likely to persist, attractive valuations outside the US are presenting compelling opportunities for investors to identify companies with high-quality fundamentals whose share prices have not yet fully reflected their underlying business strengths.

Global Indices

Hang Seng +19.27% QTD
MSCI World +4.34% QTD

Global markets volatility spiked in early August, reaching its highest level since 2022, before subsiding to levels still elevated compared to the past year. This surge was partially triggered by the BoJ's unexpected interest rate hike in July. However, the MSCI ACWI Index, encompassing global developed and emerging market stocks, finished the quarter with a +6.6% gain in US dollar terms, bringing its year-to-date return to +18.7%.

While Japanese stocks advanced in US dollar terms, they experienced a decline in yen terms.  The BoJ's rate hike in July and the subsequent yen appreciation led to a sell-off in Japanese equities in August. This monetary policy shift had global repercussions, triggering an unwinding of the longstanding yen carry trade, whereby investors borrowed in cheap yen to finance asset purchases in other currencies. This deleveraging process amplified concerns about equity markets and contributed to the volatility spike in early August.

Following the Fed's rate cut in September, US large-cap stocks rebounded, although they underperformed European, Asia-Pacific, and emerging markets for the quarter.

Fixed Income

US Treasuries 10-year yield -66.5 basis points to 3.737%.
Germany’s 10-year yield -45.9 basis points to 2.042%.
Britain’s 10-year yield to -23.3 basis points 3.944%.

Concerns regarding the overall health of the US economy emerged over Q3, particularly in relation to labour market weakness. However, consumer demand and business activity remains strong, alongside lingering domestic price pressures, especially within core services. The continued resilience suggests that the feared ‘hard landing’ scenario is a tail risk for late 2025 or early 2026. Current market pricing implies that the Fed will reduce interest rates to below 3% by the end of 2025, a full 200 basis points lower than the current rate and considerably more dovish than the Fed's own expectations.

In stark contrast, the eurozone's economic growth is significantly below trend, with a consensus forecast of just 0.6% for 2024, compared to 2.6% in the US. Germany, the region's largest economy, is teetering on the brink of recession. Eurozone domestic demand has stagnated since 2019 and business and consumer activity remains subdued despite headline inflation dipping below 2% in September. Despite the ECB implementing two 25 bps rate cuts over the summer, communication regarding further easing has been mixed even though the economic landscape appears to warrant more decisive action. Surprisingly, market forward pricing for the ECB indicates slightly fewer and more gradual rate cuts compared to the Fed. This suggests that the market may be underestimating the extent of economic weakness in the eurozone, implying potential for the eurozone bond market to outperform the US in the coming months.

Commodities

Gold spot +13.25% QTD to $2,661.89 an ounce.
Silver spot +6.42% QTD to $31.39 an ounce.
West Texas Intermediate crude -15.65% QTD to $70.83 a barrel.
Brent crude -16.94% QTD to $74.47 a barrel.

Gold markets ended Q3 reaching their highest levels ever. Investors continued to flock to the safe haven asset as the US Fed began its rate cutting cycle, geopolitical tensions remained high with the threat of expansion of conflict across the Middle East and a change in India’s tax was also supportive to higher retail purchases.

Concerns about demand and the potential for supply disruptions were the key drivers for oil in Q3. OPEC+ prepares to increase production from December onwards, after implementing cuts to support prices in the face of weak global demand. 

Weaker global oil demand growth, particularly in China and North America, has prompted the EIA to lower its oil price forecasts. World oil demand is now expected to reach 104.3 million bpd next year, and 103.1 million bpd this year, reflecting downward revisions of 300,000 bpd and 20,000 bpd, respectively. US oil production is also expected to be slightly lower than previously forecast.

As a result, the EIA now anticipates US crude to average $76.91 per barrel in 2024, and Brent crude to average $80.89 per barrel this year, representing downward revisions of 2.4% and 2.3%, respectively.

Note: Data as of 5 pm EDT 30 September 2024

The US

Following a period of relatively calm market gains in the first half of 2024, investors faced a turbulent third quarter. This instability was largely fueled by mounting concerns over US economic weakness and a sudden shift in labour markets. However, when the Fed implemented a decisive 50 basis point interest rate cut on 18^th September, it made clear that it sought to protect economic growth, prompting a recovery in equity markets. In the press conference following the cut, Fed Chair Jerome Powell said, “This decision reflects our growing confidence that with an appropriate recalibration of our policy stance, strength in the labour market can be maintained in a context of moderate growth and inflation moving sustainably down to 2%.”

Weakness in the technology and growth sectors during Q3 reflected a reassessment of US mega-cap stocks after two years of dominant performance. Despite Q2 earnings largely meeting expectations, returns were mixed, with four of the Magnificent Seven stocks experiencing declines and underperforming the broader market. Consequently, the Magnificent Seven underperformed the S&P 500 since mid-July, while the S&P 500 Equal Weight Index, a proxy for the broader market, outperformed its cap-weighted counterpart. This market reaction suggests that expectations for the group were excessively optimistic. The surge in valuations for these mega-cap companies indicate the need for investor caution. While the Magnificent Seven comprise companies with robust businesses and growth potential, their significant market weights – collectively representing approximately 30% of the S&P 500 –  present concentration risks.

Despite the underperformance of these mega-cap stocks, the S&P 500 still generated a positive return for the quarter. This may indicate that a broader cohort of high-quality companies, previously overlooked, are now attracting investor interest.

FactSet recently highlighted downward EPS revisions throughout Q3, however, some preliminary analyses, as reported by Bloomberg, suggest that expectations may have been sufficiently lowered due to downward EPS revisions. This effect could be offset by the substantial market rally in Q3 and stretched investor positioning.

Headline CPI slowed to below 3% for the first time since 2021 in July, with CPI coming in at 2.9%, down from 3% in June. Headline inflation fell to 2.5% in August, while core inflation came in at 3.2%. The labour market remains tight with September nonfarm payrolls surprising to the upside, increasing to 254,000 in September, the most in six months, following an upwardly revised 72,000 advance over the prior two months.

The eurozone

European equity markets experienced a predominantly positive performance in Q3 2024. The Stoxx Europe 600 index rose by +2.24% in Q3 2024, as political uncertainty within the European Union receded following June’s EU parliamentary elections. However, concerns regarding a potential budgetary crisis in France and Italy persisted. China's announcement of a stimulus package boosted sectors with significant exposure to the Chinese market. The ECB kept interest rates on hold at its July meeting, but then cut by 25 bps in September. Inflation continued to fall, from 2.6% in July to 2.2% in August and 1.8% in September. The eurozone economy showed increasing signs of weakening in Q3. The HCOB Eurozone Composite PMI Output index reached a 3-month high in July, rising to 51 before falling again to 49.6 in September. A deepening downturn in the manufacturing sector was behind the reduction in overall activity. Service sector activity rose slightly, with a reading of 50.5 in September. The weaker PMI data, combined with the softer inflation readings, bolstered expectations of further imminent rate cuts from the ECB.

Performance across European equities was varied. France's CAC 40 was the weakest performer, rising by +2.09%, while Germany's DAX index increased by +5.97% and Spain's IBEX by +8.53%.

In Q3, sector performance exhibited a distinct bias towards defensive sectors over cyclical ones. Sector-wise, Stoxx Euro 600’s top performers included Retail (+13.01%), Utilities (+11.82%), Telecom (+11.32%), Construction and Materials (+8.38%), Insurance (+7.99%), Travel & Leisure (+7.33%), Financial Services (+7.32%), Chemicals (+7.01%), Industrial Goods and Services (+5.13%), Banks (+4.46%), Food & Beverages (+3.02%), Personal & Household Goods (+3.01%). Conversely, Health Care (-0.41%), Basic Resources (-0.73%), Technology (-7.11%), Autos & Parts (-8.70%), and Oil & Gas (-9.01%) sectors lagged behind.

The Granolas include: GSK with a Q3 return of -0.85%, ASML -22.67%, Novo Nordisk -21.76%, Roche -10.62%, Nestlé -7.37%, AstraZeneca -6.22%, LVMH -3.52%, L'Oréal -1.95%, conversely Sanofi +14.41%, SAP +7.85%, and Novartis +1.02% advanced.

The UK

UK equities rose over the quarter as a landslide Labour general election win fuelled hopes for a recovery as political risk declined. This came after headline inflation held at 2% for a second consecutive month in June. However, headline inflation was up again in July, hitting 2.2%, slightly above the BoE’s 2% target and remaining at that level in August. Core inflation fell in July to 3.3% from June’s 3.5% but rose again in August to 3.6%. However, growth began to disappoint with the economy remaining stagnant in July. Composite PMI data indicated a drop in September to 52.6, down from 53.8 in August. The services PMI fell to 52.4, down from 53.7 in August. The UK manufacturing PMI also fell in September 2024 to 51.5, down from 52.5 in August due to slower growth, job cuts, and subdued export orders, but remained in expansionary territory. 

Although there has been some loosening of monetary policy, with the BoE cutting rates by 25 bps during its August meeting, the first cut in four years, the BoE opted not to cut rates at its September meeting. Upward pressures on headline inflation is expected as energy prices are due to increase in October. A tighter labour market in the UK has resulted in persistently elevated wage growth which may force the Bank of England to be somewhat more cautious about the pace of future easing despite comments from BoE Governor Andrew Bailey that the BoE could be a “bit more aggressive” in cutting interest rates if inflation continues to cool. In addition, Chancellor of the Exchequer, Rachel Reeves, is widely expected to announce tax hikes in her 30th October budget to fill what she claims is a hole in the public finances left by the previous government. This budget uncertainty has been the biggest concern for firms, with companies reported to be putting investment plans on hold and hiring being stifled.

Asia ex-Japan

Chinese equities demonstrated strong performance in Q3, propelled by a series of stimulus measures introduced by the Chinese government to counteract an economic slowdown.

Taiwanese equities were significantly impacted by the quarter's technology sector sell-off, with AI stocks particularly affected. Despite this challenging quarter, Taiwan remains the best-performing index market year-to-date at +25.93%.

The announcement of a Chinese stimulus package by Beijing in late September triggered a substantial rally in the Hang Seng Index, contributing to a generally positive quarter for Asian equities. China's Hang Seng Index led the way with a gain of +19.27%, followed by the MSCI India Index at +7.55%. The broader MSCI Asia Index rose by +1.84%, while Taiwan's TAIEX Index underperformed with a loss of -3.51%. The MSCI Asia ex-Japan Index recorded a gain of +7.06%.

Emerging markets

Monetary easing measures implemented in the US and China contributed to particularly strong returns for EM in September.

Thailand emerged as a top performer in Q3 2024, with the FTSE Thailand Index registering a +12.87% return. This strong performance was bolstered by the initial phase of a new government stimulus package launched in September.

The MSCI South Africa index also exhibited notable strength, achieving an +8.73% return, driven by the smooth formation of the Government of National Unity (GNU) and the central bank's decision to follow the Fed's lead by cutting interest rates for the first time since 2020.

Within emerging markets, the MSCI Emerging Markets Index generated a return of +5.71% in Q3 2024. Performance in Latin America, as reflected by the MSCI Latam Index, was also positive at +3.43%. Brazil's Bovespa Index performed well with a +6.38% return, while Colombia's MSCI Index lagged its EM peers at -2.04%. Mexico's S&P/BMV Index also underperformed, registering a modest +0.07% gain, as uncertainty surrounding judicial reforms weighed on investor sentiment.

Eastern Europe presented a mixed picture. Poland's WIG Index declined by -6.03% in Q3, while Hungary's BUX Index rose by +2.50%. Turkey's BIST 100 Index experienced a significant loss of -9.22%, contrasting with its +18.19% gain in Q2.

Currencies

The US dollar weakened throughout most of the third quarter of 2024, with the US Dollar Index falling by -4.81% during the quarter and -0.5% on a year to date basis. The drop in the dollar can be attributed to traders' rising rate cut expectations throughout the quarter. While market pricing for a 50 basis point cut was negligible at the beginning of Q3, a softening in the labour market, evidenced by a rise in unemployment and a revision of nonfarm payroll data, prompted the FOMC to commence the current easing cycle with a 50 basis point reduction. According to FOMC minutes, supporters of the half-point cut "observed that such a recalibration of the stance of monetary policy would begin to bring it into better alignment with recent indicators of inflation and the labour market.”

In contrast, the Euro experienced an increase of +4.00% against the USD during Q3, while the GBP was +5.76% in Q3 on expectations that the BoE would be the slowest to move within its rate cutting cycle. Sterling remains the best performing G10 currency against the USD.

Cryptocurrencies

Bitcoin +4.75% QTD -3.89% MTD +44.59% YTD
Ethereum -23.16% QTD -8.51% MTD +3.30% YTD

Crypto markets saw extensive outflows in the last part of the Q3 with trading remaining largely range-bound due to significant market headwinds including distributions from Mt. Gox and Genesis creditors, totaling nearly $13.5 billion, and substantial sell-offs of Bitcoin by the German and US governments. However, Q3 also saw the launch of Ethereum ETFs in the US and Bitcoin ETFs continued to see increased interest from institutional players. Bitcoin and Ether ETFs attracted approximately $4.3 billion in total flows during Q3. According to a recent note from New York Digital Investment Group’s (NYDIG) research division, Bitcoin remains the best-performing asset class in 2024 despite a subdued third quarter with YTD gains of 44.59% outpacing other assets. Cryptocurrency prices, particularly Bitcoin, benefitted from the Fed’s easing cycle, with Bitcoin rising by about 10% in September following the Fed’s first cut in four years. 

In addition, cryptocurrencies' political role has come to greater prominence due to all presidential candidates voicing support for digital assets, with Republican nominee, former President Donald Trump, insisting that he had a plan to ensure the United States will be the crypto capital of the planet. Republican policymakers announced plans for a strategic bitcoin reserve and the Republican party added crypto to its official party platform.

Note: As of 5:00 pm 30 September EDT 2024

What to think about in Q4 2024

What is becoming increasingly clear is that Q4, particularly in the run up to and immediately following the US election, will be marked by high levels of stock market, bond market and currency volatility. 

Q3 S&P 500 earnings: navigating a quarter of moderating growth and shifting expectations. Aggregate earnings are projected to reach a new all-time high for the second consecutive quarter, with current estimates for Q3 2024 at $511.4 billion, surpassing the previous quarter's actual figure of $504.8 billion, according to LSEG I/B/E/S data. However, due to more challenging y/o/y comparisons, the anticipated earnings growth rate for Q3 is 5.0%, down from 13.2% in Q2. Revenues are also expected to achieve a new record high in Q3.

Leading into this earnings season, earnings growth expectations were revised downwards by 3.2 percentage points. This adjustment aligns with the typical trend observed over the past two years, where analysts tend to lower estimates by an average of 3.3 percentage points prior to earnings season. The Energy sector experienced the most significant downgrade at -16.7 percentage points, followed by Materials (-11.8 percentage points) and Industrials (-7.6 percentage points). Only three sectors – Financials, Information Technology, and Communication Services – saw upward revisions heading into the season, with a marginal increase of just 0.5 percentage points.

The Energy sector faces a substantial negative EPS Predicted Surprise (PS%) of -3.9%, indicating that most companies within the sector are anticipated to fall short of earnings expectations. This significant negative PS% also suggests a divergence of opinions among sell-side analysts, potentially leading to heightened volatility in market reactions to earnings announcements.

The Magnificent Seven have been a key driver of earnings growth in recent quarters, and this trend is expected to continue in Q3, with an aggregate earnings growth rate of 19.0% for the group. Excluding these seven companies, Q3 earnings growth for the remaining companies in the S&P 500 declines from 5.0% to 2.1%.

From a guidance perspective, there have been 62 negative Q3 EPS pre-announcements compared to 40 positive ones, resulting in a negative/positive ratio of 1.6x. This is lower than both the long-term average of 2.5 and the prior four-quarter average of 2.2x.

Based on data from the 4^th October publication of LSEG’s S&P 500 Earnings Scorecard, Q3 blended earnings are forecast at $511.4 billion (+5.0% y/o/y, +1.3% q/o/q), while revenue is projected at $3,974.9 billion (+4.0% y/o/y, +1.2% q/o/q).

At the sector level, Industrials are poised to extend their streak of positive y/o/y earnings growth to fifteen consecutive quarters, the longest of any sector. Consumer Discretionary, Consumer Staples, and Financials are all anticipated to report their seventh consecutive quarter of growth. Conversely, Materials are expected to record a ninth consecutive quarter of earnings decline.

The Q3 blended net profit margin estimate has remained stable at 11.7% over the past three months. However, during this period, every sector except for Communication Services experienced a decline in its net margin estimate. Energy saw the largest decline (-2.05 percentage points, current value: 8.2%), followed by Materials (-1.17 percentage points, 9.2%) and Information Technology (-0.91 percentage points, 24.3%).

Looking ahead, the full-year net profit margin estimates for 2024 and 2025 are currently 11.7% and 12.5%, respectively, while the forward four-quarter estimate stands at 12.3%.

China’s stimulus focuses on asset markets but falls short to deliver a credible recovery. On 24^th September, the PBoC, in conjunction with the China Securities Regulatory Commission (CSRC) and the National Financial Regulatory Administration (NFRA), announced a comprehensive stimulus package encompassing monetary policy, real estate, and equity markets. These measures are estimated to inject nearly 2 trillion yuan into the Chinese banking and financial system. The announcement triggered a positive response in Chinese assets, with the yuan strengthening 0.4% against the US dollar.

To ease financial conditions, the PBoC reduced the reserve requirement ratio (RRR) by 50 bps to 8% for most commercial banks, its lowest level since 2007. This is expected to release approximately 1 trillion yuan of long-term liquidity into the banking system. Simultaneously, the central bank lowered the 7-day open market operation (OMO) rate by 20 bps to 1.5%. These rate cuts exceeded expectations in terms of magnitude and may be impactful in the context of weak loan demand and restrictive real interest rates stemming from persistent deflationary pressures.

In the property market, existing mortgage holders will be allowed to refinance their home loans, totaling 38 trillion yuan as of Q2 2024. This could translate to an estimated 150 billion yuan in interest savings, assuming a 50 bps reduction in effective mortgage rates. While the actual rate cut may be less aggressive than initially suggested, it underscores the government's commitment to utilising demand-side policies to alleviate homeowner burdens and stimulate consumption. Furthermore, authorities reduced the minimum down payment for second homes from 25% to a record low of 15%, alongside other targeted refinements to financing programs aimed at facilitating nationwide inventory reduction.

To bolster the domestic stock market, a 500 billion yuan swap facility was established to provide lending to qualified non-bank financial institutions, such as brokers and insurers, for equity purchases at competitive financing costs. This echoed a similar policy implemented during the 2015 market selloff. Additionally, listed companies were given access to central bank financing for stock repurchases, with an initial quota of 300 billion yuan, potentially expandable based on market conditions. This may extend the current momentum of robust buybacks observed in both onshore and offshore markets.

Finally, PBoC Governor Pan revealed that the central bank is exploring the possibility of establishing a government-sponsored market stabilisation fund, an idea that first surfaced in media reports earlier this year.

The stimulus package comes on the heels of consecutive months of disappointing economic data. It followed President Xi's call for increased policy support to address China's macroeconomic challenges. The deliberate communication of this package signals policymakers' intent to maximise its impact and regain control of the narrative, emphasising China's ability to navigate a successful economic transition.

While not a complete solution, the stimulus has begun to catalyse another policy-driven market rally. This year, Chinese equity market volatility has been largely fueled by the disparity between market expectations and actual policy implementation. Although the package may be unable to fully reverse the fundamental economic downturn, it should help reduce the elevated risk premium currently reflected in depressed equity valuations and historically low investor allocations to Chinese equities.

However, China's ailing housing market remains a significant pain point, lying at the heart of numerous structural imbalances that have contributed to a negative economic spiral and deflationary pressures. The sustainability of any recovery hinges on housing policy and its effectiveness in stabilising the real estate market and mitigating its broader economic impact. 

While the refinements to the housing destocking initiative may modestly improve funding conditions for some local authorities and government-backed entities, the overall scale of state support remains insufficient compared to the magnitude of the problem, with estimates of excess inventory valued as high as 8 trillion yuan nationwide. Consequently, investors are likely to remain hesitant to fully embrace long-term Chinese growth, opting for a more tactical approach to Chinese equities until they see convincing evidence of a large-scale and effective housing rescue plan or signs that the cycle is approaching its tail end.

Economic and Geopolitical Risk Calendar:

In addition to monetary and fiscal policy changes, there are other factors that could affect market performance in Q4. Geopolitical tensions remain high: questions remain on the Middle East with an expected retailation by Israel following strikes on it by Iran. There is also the continuing war in Ukraine along with a rising risk of confrontation with China by Vietnam and, most especially, the Philippines over its claims around the Spratly Islands in the South China sea. However, the largest geopolitical risk remains the US elections in November with the results likely to be contested across a number of US states and a rising probability of political violence as a result. Uncertainty over the true state of the US economy including the labour market, the strength of the consumer as the savings rate continues to trend downward and the ability of the Fed to continue cutting rates may all contribute to volatility. Traders will need to be aware of the potential consequences of the US elections including changes in tariff policy and tax policy, as well as debt ceiling negotiations in January and potential shifts in fiscal policy depending on the Congressional make-up. 

Other potential policy and geopolitical risks for investors that could negatively affect corporate earnings, stock market performance, currency valuations, sovereign and corporate bond markets and cryptocurrencies include: 

October 2024

1 October Mexico presidential inauguration, Mexico. Claudia Sheinbaum will be sworn in as Mexico’s first woman president.

6-11 October 2024 ASEAN Summit 2024, Vientiane, Laos. The ASEAN Summit will bring together heads of state and other government officials from member countries to discuss policy issues and strategic decisions. There is likely going to be further discussions around Chinese military activities in the South China seas as well as the implications for the regional alliance following the US election. 

16 October 2024 EU-GCC Summit, Brussel, Belgium. The first-ever summit between the EU and the Gulf Cooperation Council (GCC). The Ukraine and Israel-Iran conflicts will likely be discussed in-depth along with other issues of bilateral relevance.

17 October 2024 ECB Monetary Policy meeting. The ECB seems to be experiencing a bit of an internal conflict following its decision to cut rates by 25 bps in September. Although ECB President Christine Lagarde avoided committing to a monetary-policy path following that meeting, other ECB officials are suggesting that another cut is on the cards for the October meeting with the market pricing in a 90% chance of a 25 bps cut. 

21-26 October IMF and World Bank Annual Meetings, Washington, DC, USA. The 2024 annual autumn meetings of the International Monetary Fund (IMF) and the World Bank Group. It will include the main ministerial meetings and events taking place between 23-25 October.

22-24 October BRICS summit, Kazan, Russia. This will be the first summit with an expanded membership that includes not just Brazil, Russia, India, China and South Africa – but five important new members: Saudi Arabia, United Arab Emirates, Iran, Egypt and Ethiopia. Turkey’s potential membership may also be discussed along with further attempts to create a BRICs currency for use in trading relationships. Russia is reported to be planning a new denomination for oil, – the petroyuan – its own mBridge system to pay for oil along with a BRICs currency.

30-31 October 2024 Bank of Japan Monetary Policy meeting. Following on from the BoJ's board decision to not to raise rates again at the September meeting, BoJ Governor Kazuo Ueda has suggested that the central bank was in no rush to raise interest rates further and that much will depend on the October service-price data. The board will also conduct a quarterly review of its growth and inflation forecasts at this meeting. Traders largely expect the BoJ to hold rates at this meeting.

November 2024

5 November US Presidential and Congressional election. With polls still within the 3% margin of error, the race for the White House will be close with the results, particularly in swing states, likely to be contested. The risk of political violence remains high. If the Democrats win Pennsylvania, Wisconsin and Michigan, along with one congressional district in Nebraska, Kamala Harris will likely win the presidency. However, if the Republicans carry Pennsylvania, North Carolina and Georgia, Trump is back in the White House.

6 - 7 November Federal Reserve Monetary Policy Meeting. The Fed is widely expected to only cut rates by 25 bps at this meeting following the release of stronger than expected NFP and unemployment data. Although the FOMC Minutes stated that "It was important to communicate that the half-point cut not be interpreted as evidence of a less favorable economic outlook,” traders will now be looking closely at upcoming CPI numbers to see if inflation levels, particularly services inflation, may yet again become a concern for the Fed.

7 November Bank of England Monetary Policy Meeting. The BoE could move more aggressively to cut interest rates if inflation pressures continue to weaken but, with energy prices having risen in October and the conflict in the Middle East putting further pressure on oil prices, the “bit more aggressive" approach to lowering rates suggested by BoE Governor Andrew Bailey may not happen. Nevertheless markets are pricing in 25 bps cut at this meeting as long as wage growth continues to ease and the budget, due to be announced on 30 October, does not offer too many potentially inflationary actions.

10-16 November APEC Economic Leaders’ Week, Peru. This will bring together heads of state and government officials from member countries to discuss trade, address the challenges of the digital landscape, including the integration of artificial intelligence (AI) into the economy, digital policy, and the future of work.

11-24 November COP20 Climate Conference, Azerbaijan. At the summit, delegates including heads of state, climate experts and negotiators will be expected to agree on coordinated action to tackle climate change and build on the progress made at COP28. However, as this comes shortly after the US election, the outcome of the election is likely to have a significant impact on how involved the US will be in the conference and how effective any resulting agreements are.

18-19 November G20 Leaders’ Summit, Brazil. This meeting will be attended by 19 member countries, plus the African Union and the European Union. Key issues likely to be discussed include green finance, increasing taxation on billionaires, the reformation of global institutions to provide higher representation of emerging markets, and how to improve coordination on climate adaptation and mitigation.

December 2024

1 December South Africa G20 Presidency. During its G20 presidential year, South Africa will host a summit of heads of state and government. It will also be responsible for organising and chairing about 200 meetings of ministers and officials.

7-8 December Doha Forum, Qatar. The 22nd annual Doha Forum will take place on December 7–8, 2024 in Doha, Qatar under the theme "The Innovation Imperative". The forum will feature a variety of events including innovation focused discussions.

12 December European Central Bank Monetary Policy Meeting. The ECB has stated that they wanted to review the data that will be available before this meeting. The ECB may continue to succumb to concerns about the impact interest rate lags are having on a weakening eurozone economy. However, despite headline inflation falling, there will still likely be some degree of concern about core inflation stickiness.

17-18 December Federal Reserve Monetary Policy Meeting. There will be mounting expectations of a rate cut at this meeting if inflation continues to fall. The Fed will be watching the slowdown in the labour market closely to see if wage growth is also coming down in line with the inflation target. Markets are anticipating at most a 25 bps cut.

19 December Bank of England Monetary Policy Meeting. The BoE MPC may decide that the risks to economic growth are greater from a higher policy than the return of inflation. Markets may expect a 25 bps cut if the growth forecast declines and wage growth remains contained.

19 December Bank of Japan Monetary Policy Meeting. BoJ Deputy Governor Ryozo Himino has stated that there is potential for another rate hike if the economy performs in line with projections. The BoJ will be closely monitoring the results of the US election, the growth in wages and service price trends.

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