Sabco® Investment's Monthly Market Report - October, 2024

Sabco® Investment's Monthly Market Report - October, 2024

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October 2024 was marked by heightened volatility across global financial markets, as investors grappled with rising bond yields, mixed economic data, and escalating geopolitical tensions. Despite a strong start to the month, major equity indices experienced declines, and fixed income markets faced headwinds due to surging interest rates.​

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In the United States, the S&P 500 fell by 0.9%, snapping a five-month winning streak. The Dow Jones Industrial Average and the Nasdaq Composite also posted losses of 1.3% and 0.5%, respectively. Early optimism was dampened by disappointing third-quarter earnings from major technology firms and concerns over the Federal Reserve's future rate path amid robust economic indicators. ​

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Economic data presented a mixed picture. The U.S. economy grew at an annualized rate of 2.8% in the third quarter, slightly below expectations. Nonfarm payrolls increased by 254,000 in September, exceeding forecasts, while the unemployment rate edged down to 4.1%. However, inflationary pressures persisted, with the core Personal Consumption Expenditures (PCE) Price Index rising by 0.3% in September. ​

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Fixed income markets faced significant challenges. The Bloomberg U.S. Aggregate Bond Index declined by 2.5%, as the 10-year Treasury yield surged to 4.28% from 3.81% at the end of September. Rising yields were driven by strong economic data and recalibrated expectations for the pace of Federal Reserve rate cuts.

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High-yield bonds outperformed other fixed income sectors, with the Bloomberg U.S. High Yield Corporate Bond Index posting a modest decline of 0.5%. Investors were attracted to the higher yields offered by these securities, despite concerns over credit risk.

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International equity markets underperformed their U.S. counterparts. The MSCI EAFE Index, representing developed markets outside the U.S. and Canada, fell by 5.4%, while the MSCI Emerging Markets Index declined by 4.4%. European equities were pressured by weak economic data and escalating trade tensions, while emerging markets faced headwinds from a strengthening U.S. dollar and geopolitical uncertainties.

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In Europe, the eurozone economy expanded by 0.4% in the third quarter, surpassing expectations. However, business activity contracted for the second consecutive month, and the European Central Bank lowered interest rates by 25 basis points to 3.25% in response to waning inflation and a weak economic outlook.​

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Commodities experienced mixed performance. The Bloomberg Commodity Index declined by 1.9%, with energy prices falling due to concerns over global demand. Conversely, gold prices reached record highs, driven by safe-haven demand amid geopolitical tensions and market volatility.​

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The U.S. dollar strengthened against major currencies, supported by rising Treasury yields and robust economic data. This appreciation exerted pressure on emerging market currencies and contributed to capital outflows from these regions.​

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Geopolitical tensions escalated in the Middle East, with military strikes intensifying between Israel and Iran. These developments contributed to increased market volatility and heightened investor risk aversion.

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Investor sentiment was further impacted by uncertainty surrounding the upcoming U.S. presidential election. Markets remained cautious as they assessed potential policy shifts and their implications for economic growth and financial markets.​

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In summary, October 2024 was characterized by increased market volatility, driven by rising interest rates, mixed economic data, and geopolitical uncertainties. While U.S. equities showed relative resilience, international markets and fixed income sectors faced significant challenges. Investors navigated a complex landscape, balancing growth prospects against inflationary pressures and geopolitical risks.​