Stock Take

Last week saw the anniversary of the 1929 Stock Market crash, an event which led directly into the great depression.

94 years later, the current market is going through its own struggles, yet the world is a very different place.

While macro-economic and geopolitical challenges remain, the US economy has actually been performing well this year. Last week it was revealed US GDP grew 4.9% during the third quarter, driven by strong consumer spending. This was the fastest rate since the end of 2021, and was notably up compared to the 2.1% growth recorded in the second quarter.

From a markets point of view, one consequence will be the Federal Reserve feeling more confident keeping interest rates higher when they next meet to discuss the topic.

The S&P 500 and NASDAQ fell by 2.5% and 2.6% respectively with the aptly called “S&P7” continuing to dictate the market. A strong advance by Amazon was offset by a sharp post-result fall by Alphabet which missed analyst expectations.

There was a similarly foreboding feeling in the UK, where the FTSE 100 slipped ahead of this week’s Bank of England policy meeting.

Within the EU, the European Central Bank (ECB) left interest rates unchanged at last week’s policy meeting, with the base rate remaining at 4.5%. That brought an end to 10 consecutive rate hikes since last summer, where the ECB rapidly lifted rates to try and contain surging inflation.

These pressures have abated meaningfully this year with inflation expected to have slowed last month. With the economy having also weakened, there is less pressure for the ECB to lift rates further, although ECB President Christine Lagarde has left additional moves firmly on the table.

Despite this, the MSCI Europe ex UK index closed the week 0.8% lower.

Hetal Mehta, Head of Economic Research at St. James’s Place noted: “Unlike the last meeting, the ECB kept rates on hold as widely expected. We’ve had a long spate of negative data surprises – including weak business sentiment – and continued progress on inflation. But there is still a while to go before the ECB will be comfortable enough to signal a cut in rates. Unemployment is still low and core inflation tends to move slowly.

“The ECB is most likely done on hiking now, but the bias will be towards a hike for a few more months.”

Bucking the trend of negative performance, Chinese equities rose last week after the government announced further support for the economy, including an increase in its fiscal deficit and fresh sovereign debt issuance for disaster relief and construction.

The lift came after recent falls left the CSI 300 Index at its lowest level since 2019. The Chinese market has been weak this year with the country’s property market notably struggling.

However Martin Hennecke, Head of Asia & Middle East Investment Advisory & Comms at St. James’s Place, notes this may prove a long term opportunity for investors: “From a China macro perspective, these days, whenever there are announcements of new stimulus measures – and we have been seeing a steady flow of such recently – the public reaction is one of ‘crying wolf’ too many times and its being largely ignored, yet stabilising industrial production and consumer spending may indicate they are starting to work their way through, at last.

“When retail investors exit depressed markets or sectors driven by recency bias, corporate CFOs looking at business value vs. price, often see and exploit the opportunity, with 2023 corporate stock buybacks in Hong Kong expected to come in four times higher than the prior five-year average being a good example.”

Wealth Check

Financially it’s been a difficult few years for households in a range of income brackets. The cost of living has risen substantially as inflation has soared, while investment markets have been choppy, causing additional stress for those planning their financial future.

You may think that we can’t do anything to help, but it’s during the hard times that the value of financial advice really shines through.

The purpose of financial planning is to help you manage your income and assets in the best way, so you can achieve your life goals.

You may think that it’s only worth talking to us if you have a specific goal in mind, such as early retirement, or after a big financial event such as divorce or receiving an inheritance, when you have a large sum of money to manage.

Although that’s part of the role of a financial adviser – and these are all key moments when good advice is important – in reality, we can help you tackle a whole range of money-related issues. The ultimate goal is for you to have the peace of mind that comes with knowing you’re on the right path. This can include:

  • Making the most of your money on a day-to-day basis.
  • Being financially capable of dealing with the unexpected.
  • Feeling confident, empowered and knowledgeable.
  • Making smart use of debt, investments, insurance policies, tax reliefs and financial products to help you on your journey.

The current cost-of-living crisis presents a huge threat to many people and their prospects of achieving these aims. Although some are more insulated than others, the impact of high inflation, energy bills, interest-rate rises and other economic challenges have become widespread.

We’re here to help you with the most mundane aspects of money management – and the most complex areas, too. Talking about how difficult things are, or how worried you are, is the first step to feeling better about it.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

In The Picture

With valuations well below the global average, excluding China when screening the globe for investment opportunities at this time may not be in investors’ best interest, even if challenges remain.

The Last Word

“It is not just about the game. Our country goes through such a lot. We are just grateful that we can be here. I want to tell the people of South Africa ‘thank you so much’.”

South Africa captain, Siya Kolisi, on winning the Rugby World Cup over the weekend.

The information contained is correct as at the date of the article. The information contained does not constitute investment advice and is not intended to state, indicate or imply that current or past results are indicative of future results or expectations. Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place.

Source: London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). ©LSE Group 2023. FTSE Russell is a trading name of certain of the LSE Group companies.

“FTSE Russell®” is a trade mark of the relevant LSE Group companies and is used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.

© S&P Dow Jones LLC 2023; all rights reserved

Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, endorsed, reviewed or produced by MSCI. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.

SJP Approved 30/10/2023