The Month in a Minute
📰 Overall: September was a strong month for markets overall, with many continuing to see all-time highs. This came despite some mixed economic data, as all eyes are still on the labour market.
💪 Benchmark Performance: Wealthify's higher-risk Original Plans outperformed their benchmarks, although lower-risk Original and all Ethical Plans didn’t perform as favourably.💪
📈 Market Movers: US (+2.0%), Emerging Markets (+6.4%), Asia Pacific (+7.5%).
🗒️ Plan Summary: Original and Ethical Plans with a higher allocation to bonds performed better than those with a higher allocation to shares.
🌍 Original Plans: Shares (+0.2%) and bonds (+0.7%) both increased.
🌱 Ethical Plans: Shares (-0.1%) decreased but bonds (+0.6%) increased.
🕰️ Going Forward: Our preference for bonds favoured us this month, as more defensive Plans outperformed those with more risk. We remain confident in our cautious positioning — and are 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).
It was a pivotal month for markets following a jumbo interest rate cut by the US Federal Reserve (the Fed), with China hoping to renew appetite for its equities using an ambitious stimulus package.
Historically, September has been one of the most challenging months for financial markets and stock performance, with this phenomenon often referred to as the ‘September effect’.
Whether it’s the end-of-summer optimism as traders come back from their holidays, or that companies are focusing more on the end-of-year books and looking to take profit in their portfolios; the reasons for the September effect are unclear and often debated.
September 2024, however, was a relatively good month for markets, with global shares and global bonds both moving higher.
US markets drove much of this positive performance, as the S&P 500 continued to push into all-time highs after a turbulent start, when a spell of lower-than-expected jobs market data and questions surrounding US economic health caused markets to fall.
Data remains mixed though.
There are signs of positivity as inflation continues its decline, especially with the US headline figure falling to its lowest rate since early 2021.
Manufacturing and services numbers were also released, which showed an expansion in August, with retail sales figures also coming in better than expected.
This month, returns were boosted by the Fed’s long-awaited interest rate cut — its first since March 2020.
Whilst the timing of this was expected by markets, the magnitude of the 50-basis point cut came as a surprise to many. Comments from the Fed also suggested a further 50 basis points may be cut by the end of the year.
This jumbo cut caused markets to rally, as mega-cap stocks (stocks with a market value of over $200 billion) like the Magnificent 7 (Meta, Alphabet, Tesla, Apple, Nvidia, Amazon, and Microsoft) regained momentum after struggling throughout July and August.
Bond prices also rose this month, with 10-year US government bonds hitting a year-to-date high (although these have declined slightly since the interest rate cut).
Another big September story was from China and its government stimulus package, specifically designed to boost equities. Whilst this lifted market sentiment and caused a huge surge in Chinese markets (reaching highs not seen since the beginning of last year), there are still many questions to be answered regarding the health of the Chinese economy.
As a result, many investors were left wondering whether this stimulus package will be enough for Beijing to hit its own ambitious growth target of 5% by the end of 2024.
Markets
Asia Pacific (+7.5%) markets were the strongest performers this month, closely followed by Emerging Markets (+6.4%). Gains for both regions were driven by China, which itself gained over 20% for the month due to the release of its stimulus package.
The US (+2.0%) also produced good returns in September, following the Fed’s jumbo rate cut towards the end of the month.
The UK’s FTSE 100 (-1.7%) and FTSE 250 (-0.8%) both produced modest losses after a relatively flat month. However, the FTSE 100 did benefit later in the month with the increase in oil prices — due to rising tensions in the Middle East (and its heavy makeup of oil companies).
European markets (-0.5%) had a volatile month, heavily affected by data coming from the US, resulting in a slightly negative finish. Shares were boosted though with the release of the Chinese stimulus package due to Chinese consumers being key to many European companies. This trend could continue if the revival of China carries on.
Currency
It was a strong month for pound sterling, which strengthened against most major currencies — notably, against the US dollar by 1.9% and Euro by 1.1%. The pound has been on a strong run over the past few months due to the Bank of England’s more patient approach to rate cuts, with Goldman Sachs predicting that it will continue to gain against the likes of the US dollar over the next year.
Investment type performance breakdown
September was a good month for Wealthify Plans, as bonds outperformed shares and provided strong returns for our Original (+0.7%) and Ethical (+0.6%) Plans.
Our cautious positioning benefited the strong returns seen in bonds, and lower-risk Plans that have a higher allocation of bonds performed better than higher-risk Plans (which have a greater allocation of shares).
Shares still provided modest returns for our Original (+0.2%) Plans, although they did cause small loses in our Ethical (-0.1%) Plans. This is understandable because when people begin to look for more risk-on investments, you’ll see a change from quality stocks with strong fundamentals, into potentially more volatile growth stocks. This may cause ESG (Environmental, Social, and Governance) portfolios to struggle, as many of the companies with good ESG credential are likely to be quality companies.
The money market continues to benefit from high interest rates, providing positive returns for both Ethical and Original Plans.
Summary with Plan details
Questions remain about aspects of the US economy and the valuation of tech companies, meaning Plans with a higher allocation to bonds performed better than those with a higher allocation to 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.
