Investment market update: June 2024

2024 is a historic election year – elections will take place in 50 countries. More than 2 billion voters will head to the polls in countries including the UK, US, France, and South Africa throughout the year. Political uncertainty can affect investment markets and there was evidence of this in June.

During market volatility, remember that markets have, historically, recovered in the longer term. And, for most investors, sticking to their long-term investment strategy makes financial sense.

Read on to find out what affected investment markets around the world in June 2024.

UK

Despite hopes that the UK economy had turned a corner when it exited a recession in the first quarter of 2024, GDP figures were disappointing in April. Official figures show the economy flatlined when compared to a month earlier.

Yet, the Bank of England (BoE) remains optimistic. The central bank raised its second-quarter growth forecast to 0.5% after it revised upwards its May 2024 prediction of 0.2%.

There was further good news for the BoE too – UK inflation fell to its official target of 2% in the 12 months to May 2024 for the first time since 2021. The news led to speculation that the bank would cut its base interest rate, but the Monetary Policy Committee opted to hold it at 5.25%.

The positive inflation data sets the stage for a rate cut later this year, with the BoE saying it will keep interest rates “under review”.

As inflation pressures started to ease, figures from the Insolvency Service suggest fewer businesses are failing. The number of firms that became insolvent fell by 4% in May when compared to a month earlier. Even so, the number is 3% higher when compared to the same period in 2023.

Readings from the S&P Global Purchasing Managers’ Index (PMI), which measures business conditions, are also positive. In May:

• UK factories returned to growth with the most rapid expansion of output in two years. The boost was mainly supported by domestic demand, as new export orders fell.
• The service sector lost momentum but still posted growth. The slower pace is partly due to new orders easing when compared to the 11-month high recorded in April.

Uncertainty as UK political leaders campaigned ahead of the 4 July 2024 general election was partly linked to the FTSE 100 index, which includes the largest 100 companies listed on the London Stock Exchange, falling by 0.4% on 4 June.

Amid political turmoil in France, London regained its crown as Europe’s biggest stock market, which Paris has held for the last two years. According to Bloomberg, as of 17 June, stocks in the UK were collectively worth $3.18 trillion (£2.52 trillion) compared to France’s $3.13 trillion (£2.48 trillion) valuation.

Europe

At the start of the month, the European Central Bank (ECB) slashed its three key interest rates by 25 basis points in the first cut since the start of the Covid-19 pandemic.

Yet, figures released by Eurostat just two weeks later showed inflation was 2.6% in the year to May 2024 across the eurozone, up from 2.4% in April. The news prompted some commentators to speculate the cut to interest rates had been made too soon.

PMI data was positive in the eurozone as business activity grew at the fastest rate this year. Of the top four economies in the bloc, only France contracted slightly, while Germany, Spain, and Italy posted growth.

President of France Emmanuel Macron called a snap election, which is set to be held between 30 June and 7 July. The election has added to the political uncertainty affecting markets.

Indeed, on 10 June, France’s CAC index, which is comprised of 40 of the most prominent listed companies in the country, was down 2%. The effects were felt in other stock markets too, with Germany’s DAX falling 0.9% and Italy’s FTSE MIB losing 0.95%.

In response to the snap election, credit ratings agency Moody’s issued France with a credit warning, stating there was an increased risk to “fiscal consolidation”. Citigroup also downgraded its rating for European stocks to neutral from overweight due to “heightened political risks”.

US

The New York Stock Exchange got off to a rocky start in June. On 3 June, a technical issue led to large fluctuations in the listed prices of certain stocks. Warren Buffett’s Berkshire Hathaway was affected by the glitch, which suggested shares had fallen in value by 99%. Fortunately, the issue was resolved within an hour.

The rate of inflation fell to 3.3% in May 2024 but remains above the Federal Reserve’s target of 2%.

The drop in inflation led to a boost for Wall Street. On 12 June, both the S&P 500 index, which includes 500 of the largest companies listed in stock exchanges in the US, and tech-focused index Nasdaq opened at all-time highs.

Figures from the US Bureau of Labor Statistics indicated that businesses are feeling confident about their future. 272,000 jobs were added in May, far higher than the 185,000 Wall Street has forecast. Yet, unemployment also increased slightly to 4%.

Tesla shareholders voted in favour of CEO Elon Musk’s huge $56 billion (£44 billion) pay package – the largest corporate pay package in US history by a substantial margin. The results of the annual general meeting led to Tesla shares rising by around 6.6%, which helped recover some of the 28% losses they’ve suffered so far this year.

Asia

Moody’s raised China’s growth forecast to 4.5%, up from 4%. While growth of 4.5% would be great news in many developed countries, it would mark a slowdown for China, which saw its GDP rise by 5.2% in 2023.

However, signs of a trade war starting between China and the EU loomed and could dampen growth expectations.

The EU notified China that it intended to impose tariffs of up to 38% on imports of Chinese electric vehicles. The move would trigger duties of more than €2 billion (£1.69 billion) a year. The announcement followed an investigation into alleged unfair state subsidies and similar tariff increases from the US earlier this year.

In retaliation, China opened an anti-dumping investigation into imported pork and its by-products from the EU. China is the EU’s largest overseas market for pork, which was worth $1.8 billion (£1.42 billion) in 2023.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.