Market Update – June 2024

In the midst of a turbulent political climate, financial markets faced a protracted period of uncertainty in June, leaving many investors on edge as they grappled with the implications of shifting global power dynamics.

In the lead-up to Labour’s landslide win in the General Election, as the Conservatives sink to their worst-ever result, it was widely believed that the UK election would be something of a non-event from a financial market perspective – which it has so far proven at the time of writing. In terms of fiscal strategy, Labour’s stance closely aligns with what was in place under the Conservatives, promising minimal change in fiscal policy.

In France, their parliamentary vote upset has resulted in a hung parliament in the Eurozone’s second-biggest economy, with limited ability for any party to deliver on their promised policies. President Macron will continue to preside over international and defence policy, but the world is now on notice for a potentially more radical French leader in 2027.

With the US election also looming on the horizon, markets continue to face uncertainty and a risk to the global outlook.  A second term for President Joe Biden would represent broad policy continuity, but the first presidential candidate debate brought into question whether President Biden would even make it as far as November’s poll. A return to power for Donald Trump may result in changes to tariff, fiscal, regulatory and immigration policies that could cause uncertainty and result in strong inflationary pressures.

The notion of rates being higher for longer is founded on the basis of a number of factors, such as there being no evidence of a cessation of hostilities in Ukraine or the Middle East. We have also seen that global trade tension, climate change, the green energy transition, demographics, increased levels of spending on defence and the appeal of “populist” politicians conspire to make inflation a greater threat than we have been used to for many years.

Entering 2024, most have been buoyed by a wide opinion that inflation would continue to fall to target levels, with the prospect of interest rate cutting cycles lying ahead. With a seasonal pause for breath over the summer now looking more likely and the fact that these hopes have not yet been met, it is widely believed that the Bank of England (BOE) will, however, start to cut rates in August and that the Federal Reserve (Fed) will begin to make cuts in September and December.

Economic growth has also been resilient, and equities have prospered with gains in global equity markets having been relatively concentrated into a small group of (mainly) leading technology companies.  Should Central Banks begin to cut rates, and inflation remains under control, other sectors may also see some return to growth and higher confidence from investors moving into the second half of the year and beyond.

Despite the uncertainties and ongoing political suspense, as we look ahead to the second half of the year the importance of a long-term investment strategy is still clear, and supported by the resilience of the market and the prospect of continued growth.

Should you wish to discuss your investments, please do not hesitate to get in touch with an Integrity365 Independent Financial Adviser on 0117 450 1300.