Market Outlook Summary — Oct 2024
Macroeconomic EventsThe U.S. economy is showing mixed signals. October’s nonfarm payrolls rose by only 12,000, the smallest gain since late 2020, largely due to factors such as the Boeing strike and disruptions caused by hurricane Helene. The unemployment rate held steady at 4.1%, while Inflation inched up to 2.6%, with shelter costs driving over half of the increase. The Federal Reserve lowered interest rates by 25 basis points to 4.50%-4.75%, prioritizing employment over inflation control. Despite the rate cuts, Treasury yields and mortgage rates have risen sharply, with the 10-year yield at 4.37%. GDP growth moderated to 2.8% in Q3 and is forecast at 2.4% for Q4.
Eurozone inflation rose to 2.0% in October, led by food and services, with Germany and France posting notable increases. The European Central Bank (ECB) also cut rates by 25 basis points, citing progress in curbing inflation but acknowledging weaker economic activity. Policymakers suggest further rate cuts are likely as they aim for a 2% inflation target.
Geopolitical Events
Tensions escalated as the Biden administration allowed Ukraine to use U.S.-made long-range missiles against Russia, prompting a stern response from Moscow, including updates to its nuclear doctrine. These developments increased geopolitical risks, unsettling global markets. In the wake of these events, U.S. and European equities saw declines, with investors wary of potential escalation.
Market Trends
EquitiesU.S. equities experienced volatility, with the S&P 500 up 0.9% for the month but retreating from record highs due to concerns over Trump’s proposed tariffs and regulatory changes. European markets suffered declines, with the DAX and CAC indices down nearly 5%, impacted by geopolitical tensions and trade fears. Emerging market equities also struggled, with notable drops in Hong Kong and Japan.
BondsU.S. Treasury yields climbed as expectations of slower Fed rate cuts under the Trump administration grew. European bond yields showed mixed movements, with Germany’s 10-year yield rising to 2.32% while shorter-term yields fell.
Gold and CommoditiesGold prices hit a high of $2,801 before retreating by 1.5% amid a stronger dollar and a shift toward riskier assets. Oil prices dipped slightly, with geopolitical developments providing only temporary support.
CryptocurrenciesBitcoin surged 37% to a record $92,000, fueled by optimism about Trump’s pro-crypto stance and potential investments in the sector by Trump Media.
Currency Trends
The U.S. dollar strengthened broadly, rising 5.2% on the Dollar Index, driven by higher Treasury yields. The euro, sterling, and yen all weakened against the dollar, with euro-dollar exchange rates now at $1.056.