WeeklyWatch – Geopolitical concerns shake the globe

8th October 2024

Stock Take

Middle Eastern tensions rock global economics

Amid the escalating tensions in the Middle East and the resultant geopolitical fears, US and Chinese markets overcame the challenges to post impressive data, whereas European and Japanese shares faced more of a struggle.

Soaring oil prices

As a result of the conflict between Israel and Iran, there was an increase in oil prices. There was a price jump of 9.2% in Brent crude oil, bringing the overall sale price to $78.23 a barrel. It’s the strongest weekly advance in two years, with data revealing ongoing low levels of global oil inventories are somewhat responsible for the price increase.

The vast increase in energy prices was one of the reasons that inflation soared, having a huge impact on the global economy following the pandemic. Having said this, despite last week’s rise, the price of oil remains far below its highest point of the year, which was reached earlier this year in April when barrels cost nearly $90. It was also way off the highs of 2022, when prices temporarily reached $120.

When describing the impact of recent events, Chief Investment Officer at Bluebay Asset Management Mark Dowding said:

“Events in the Middle East have put markets on edge over the course of the past week. Nevertheless, the relatively contained move up in oil prices in the past several days demonstrates the fact that a conflict, which is regionally contained, may have limited impact on the trajectory of the global economy.”

Strong data makes for positive markets

The US markets enjoyed strong jobs data, which was released on Friday. Investors had been concerned about positive data being a hindrance in the Fed’s interest rate cut decision. As global situations develop, along with a recent recession scare, investors are using this data to gain an accurate assessment of the US economy’s strength.

In her commentary on the latest figures, the Head of Economic Research at St. James’s Place, Hetal Mehta, said:

“This month’s US labour market data have surprised positively and should help reset some of the overly negative sentiment that has been building regarding the US outlook. The fall in the unemployment rate and pick-up in wage growth is modest but important. It shows the labour market is rebalancing from very tight levels, but we do not think this translates into a high/imminent recession risk.”

The S&P 500 Index also increased by 0.2%, marking a fourth straight week it’s risen.

China also unscathed

The unfolding events in the Middle East and the subsequent impact on oil prices have had very little impact on the Chinese markets, which continued to surge, building on their success following their recent implementation of aggressive economic support measures.

The nation saw mainland equities soar by 8.1% (Shanghai Composite) and Hong Kong’s Hang Seng emerged as the best-performing major market this year, where their year-to-date gains moved beyond the 30% mark (in local currency). It remains to be seen if underlying company fundamentals will align with investor optimism as the next year unfolds, but as it stands, confidence is high.

Further falls across Europe

The positivity sadly ran out at Europe’s doorstep. The MSCI Europe ex UK saw a retraction of 2.1%. This was despite the data revealing that headline inflation had fallen below the European Central Bank’s (ECB) 2.0% target.

On the one hand, this fuels hopes that the ECB will cut rates, but it also exposes weaknesses in its economic growth, which is a more prominent area of worry for investors as a result of the increasing geopolitical concerns.

UK on tenterhooks ahead of the Autumn Budget

UK equity markets also took a tumble last week while investors wait with bated breath ahead of Labour’s first Budget revelation later this month. On Wednesday, the Bank of England issued a warning:

“Markets remain susceptible to a sharp correction, which could affect the cost and availability of credit to UK households and businesses, with investors sensitive to short-term developments in a challenging global risk environment. Global vulnerabilities remain material, as does uncertainty around the geopolitical environment and global outlook.”

Japan feels the pressure

Japanese equities took a battering from heavy selling pressure, which saw the Nikkei 225 falling by 3.0% (local currency). This came about after they welcomed in their new Prime Minister, Shigeru Ishiba, who’s widely perceived as a hawkish politician when it comes to economic matters; his victory in the election has consequently led to more selling pressure within the equity markets.

Wealth Check

The complexity of a payout

If you’ve ever received a financial award or payout as a result of an experience that was potentially life-changing or even traumatic, you may feel that it’s the end of one financial journey. This feeling is completely understandable; it’s likely that you’ve endured a lot of emotional, practical and legal battles in order to receive the compensation/payout that you’re owed.

However, as one chapter ends, another begins – especially when the financial sums are significant. Once a settlement has been secured, you need to work out what will be done with the money awarded and understand the impact this will have on life going forward.

These matters are rarely simple. It’s highly likely that there will be a large number of issues to think through; these can include factors such as tax, social support or potential care and rehabilitation needs, plus more. This makes it essential to ensure that the money is utilised in the most effective way over the long term.

Seeking out financial advice

When it comes to these kinds of situations, financial advice is imperative. It can be overwhelming even knowing where to begin when it comes to award settlements, as several factors can crop up over time to make proceeding even more complicated than first thought.

This is where a financial adviser is invaluable. They’re able to work with law firms and clients from the start, assisting claimants and consistently reviewing their finances to ensure that they’re receiving the right kind of assistance for their long-term financial success.

How do law firm and financial adviser roles differ?

The extent to which a claim is organised is dependent on whether the law firm handling the case has its own panel of preferred advisers and what the structure of the settlement looks like once it’s been made. The law firm could also take on the financial decisions, or this responsibility could be given to the claimant’s family or to the claimant themself.

Lawyers are unable to make regulated financial decisions, enhancing the incentive of working alongside a financial adviser whose skills are much better suited to assisting and achieving the needs of the individual.

Financial advice is always a good choice

Whatever the circumstances, seeking out financial advice is always a good investment. For individuals receiving compensation from personal injury or clinical negligence claims, the case for specialist financial help is even more convincing.

In The Picture

Reaching a big milestone or major life event is a significant reason to get financial advice. According to our Real Life Advice Report, 18- to 34-year-olds are facing the most financial complexity; however, they’re more proactive in seeking financial advice to get assistance on managing their finances than other generations are.

Source: Opinium surveyed just under 12,000 UK adults nationwide in two polls between May and August 2024. Quotas and post-weighting were applied to the sample to make the dataset representative of the UK adult population. Quantitative data referenced here is sourced from the first poll, which had a total sample of 7,995 respondents. Survey included those aged 18–34 (1,940), 35-54 (2,654) and 55 and over (3,401).

The Last Word

“You have time to prepare – all day today, all day Monday, probably all-day Tuesday, to be sure that your hurricane preparedness plan is in place.”

– Ron DeSantis, Governor of Florida, speaking on Sunday as he tells residents to prepare for the incoming Hurricane Milton, just a couple of weeks after the state was hit by Hurricane Helene.

The information contained is correct as at the date of the article. The information contained does not constitute investment advice and is not intended to state, indicate or imply that current or past results are indicative of future results or expectations. Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place.

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© S&P Dow Jones LLC 2024; all rights reserved.

Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, endorsed, reviewed or produced by MSCI. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.

 

SJP approved 07/10/2024