The Month in a Minute
📰 Overall: Following a strong start to October, unstable earnings and political uncertainty had a negative effect on growth, leaving many markets relatively flat for the month.
💪 Benchmark Performance: Wealthify's Original Adventurous Plan outperformed its benchmark, although lower-risk Original and all Ethical Plans underperformed against theirs.
📈 Market Movers: Japan (+2.0%).
🗒️ Plan Summary: Original and Ethical Plans with a higher allocation to shares performed better than those with a higher allocation to bonds.
🌍 Original Plans: Shares (+1.1%) increased and bonds (-2.0%) decreased.
🌱 Ethical Plans: Shares (0.0%) were flat and bonds (-1.8%) decreased.
🕰️ Going Forward: Despite shares outperforming bonds this month, we remain confident in our cautious positioning — and optimistic that the diverse set of opportunities we’ve selected will continue to have a positive effect on Plans for the rest of 2024 (whilst still providing protection if economic conditions deteriorate).
Political uncertainty and recession fears cause a pullback in global equites after a strong run in 2024.
October was a volatile month for markets, as recession risks remain a key concern for many investors. Uncertainty around interest rates and the US election hit market sentiment, causing equites to decline after a strong rally over the first nine months of the year.
Market uncertainty in the lead-up to elections is no surprise, with investors weighing the possible outcomes. Even though policy stances and potential regulatory impacts could have substantial consequences, it’s important to remember that these are mainly short-term issues.
The removal of election-related fears should provide more clarity and relief to markets, emphasising the importance of a long-term, diversified strategy.
US markets did decline in October, however, with the S&P 500 ending a five-month streak of gains and treasuries also falling.
Growth risks still weigh heavy on investors, with economic data presenting a mixed picture.
Inflation held relatively steady, coming in slightly higher than expected following the Federal Reserve’s 50 basis point cut in September. The labour market is still being watched closely, as it will give an indication of potential future cuts.
September’s payroll report coming early beat expectations, showing the US economy added 254,000 jobs as the unemployment rate fell to 4.1%.
Later in the month, however, other reports showed some weakening, with job openings falling to their lowest level since January 2021.
The UK saw a pivotal month in its economic future, as Labour announced its first budget in 14 years.
This budget did worry investors slightly, as the government’s spending plans were deemed to provide limited long-term benefit. This, along with a change in interest rate expectations, also put pressure on UK Gilts.
One area that did benefit was the Alternative Investment Market (AIM).
Comprising small and medium-sized growth companies, AIM rallied, as tax benefits boosted investor confidence in these firms.
UK inflation continued its decline throughout October, falling significantly to 1.7% year-over-year, with core inflation falling to 3.2%. Both these numbers were lower than expected, providing relief to investors and many households.
Markets
Japanese markets (+2.0%) were the notable performers in October, as political uncertainty created by the country’s general elections lifted, causing markets to rally.
Gains were mainly driven by large cap stocks (companies with a market capitalisation value of over $10 billion), as the weakening yen supported large cap exporters such as technology, autos, and machinery stocks.
US markets (-1.0%) declined slightly, amid election uncertainty and ongoing doubt about interest rates. Rate cuts are still expected in November and potentially December — but another jumbo 50 basis point cut is unlikely.
The UK FTSE 100 (-1.5%) and FTSE 250 (-3.2%) both declined, although many larger companies exposed to global industrial markets were negatively affected by the mixed short-term economic outlook.
Emerging Markets (-4.4%) and Asia ex-Japan (-4.9%) underperformed in October; this was due to pressure from a strong US dollar, as well as volatility in Chinese equites following uncertainty surrounding the government’s stimulus in September.
Indian share prices saw some of the largest declines, as investors took profits amid fears of escalation in the Middle East conflict disrupting oil prices (a key commodity imported by India).
Currency
October saw the pound weaken against the US dollar by 3.7%, with the dollar strengthening against most major currencies amidst rising bond yields and possibility of the Federal Reserve’s (the Fed) rates remaining high for longer.
The pound also declined against the euro by 1.4% — but did strengthen against the declining Japanese yen by 2.0%.
Investment type performance breakdown
October was a mixed month for Wealthify Plans, as shares outperformed bonds, which provided negative returns for our Original (-2.0%) and Ethical (-1.8%) Plans.
Shares were flat (+0.0%) in Ethical Plans, providing healthier returns (+1.1) in Original Plans.
Some of the strongest returns for our Original Plans came from infrastructure (+1.9%), spurred on by expectations of upcoming interest rate cuts from
The money market continues to benefit from high interest rates, providing positive returns for both Ethical (+0.4) and Original Plans (+0.4).
Summary with Plan details
Despite questions remaining about aspects of the US economy and the valuation of tech companies, we remain confident in our cautious positioning.
As long-term investors, we’ve positioned Plans against unforeseen risks such as a global recession — which we think are underappreciated by the market given the high valuations of shares.
Our Investment Team continues to actively monitor the financial markets and their impact on Plans — and are always ready to act in your best interest as events unfold. We are continually evaluating new market information and key market drivers to help keep your Investment Plan on track.
It’s important to remember that it’s normal for markets to go up and down, with periods of volatility to be expected when you invest. As always, we continue to look for opportunities to best position your investments, with the goal of protecting your money and achieving your long-term objectives.
With investing, your capital is at risk, the value of your investments can go down as well as up, and you could get back less than invested.
Past performance is not a reliable indicator of future results.
Wealthify does not provide financial advice. Please seek financial advice if you are unsure about investing.
