Weekly Watch – America taking things in stride

15^th October 2024

Stock Take

US reaches new highs, despite inflation surprise

New levels were reached when both the S&P 500 and Dow Jones Industrial Average achieved record highs, posting 1.1% and 1.2% increases over five days. What makes these accomplishments even more impressive is that they came despite US inflation coming in at 2.4% – higher than expected and narrowly beating September predictions of 2.3%, although it still represented a small drop on the August figures of 2.5%.

There was more concern centred on the increase in core inflation, which excludes variable food and energy prices. Since July, the inflation figure has remained at 3.2%, but in September, it increased to 3.3%.

In response to the figures, Chief Investment Officer at St. James’s Place Justin Onuekwusi stated:

“The data coming out of the US is mixed, and I expect it to stay that way for the next few months. CPI is currently higher than expected, and what concerns me isn’t the headline number, but the core inflation. Core inflation suggests that prices will remain elevated for longer, which could challenge the Fed’s ability to bring it down. However, the elements driving the ‘higher for longer’ narrative are the most volatile, like insurance costs, which spiked in August but have since come down. While we are on a deflationary trend, the final push to get inflation back to target may be the hardest part.”

Uncertain UK

In the UK, market performance made for less happy reading. GDP numbers for August and widespread uncertainty about the upcoming Budget have caused confidence to weaken.

Friday saw the Office for National Statistics reveal that the UK economy grew by only 0.2% in August – this followed two months of zero growth.

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

“The monthly GDP numbers for August were in line with expectations, but some downward revisions to the historical data suggest the third quarter will most likely end up being a bit weaker than originally anticipated. The Bank of England was assuming 0.3% GDP growth at the time of its September meeting. Slowdowns in these last few months of the year are not a big surprise to us; growth in the first half of the year was unsustainably strong. Business sentiment is holding up for now, but uncertainty around the Budget leaves the growth outlook uncertain.”

EU still standing

Across the EU, statistics gave a glimmer of hope following the bleak run the continent has been experiencing for some time. The MSCI Europe ex UK Index increased by 1.0% in local currency over the course of the week.

This success came despite the continuous struggle for economic growth faced by many countries across the continent. For example, the German Economy Minister, Robert Habeck, spoke out last week, saying that he expected the German economy to shrink this year.

As a result of these figures, the positivity that exists in the markets can explain the growing sense and expectation that the European Central Bank could accelerate its interest rate cut in its effort to encourage further growth.

Across to Asia

The Chinese Shanghai Composite saw a fall of 3.6%, as optimism begins to fade in regard to the recent strict stimulus announcements. The government previously announced plans for a massive financial stimulus package, and as a result, the markets have been very up and down. Investors are struggling to predict what it will eventually look like and how it will play out for the nation.

Arguing that this outlook misses the wider investment perspective, Head of Asia & Middle East Investment Advisory & Communications at St. James’s Place Martin Hennecke went on to say:

“It appears that a lot of investors are fixated on, if not panicked about, the question of exactly how much stimulus is being rolled out and when. Most are missing the wider picture that even the lowest projection of 2024 GDP prior to the stimulus announcements was 4.6%. This compares favourably with most other major economies, such as Germany, which is now projected to go slightly backwards for the second year in a row.”

Wealth Check

Connecting milestones with financial advice

Many people only start to seek out financial advice when a major life event or milestone is reached – such as marriage, home ownership or a change in employment status – according to the second chapter of the Real Life Advice Report, St. James’s Place’s biggest consumer survey to date.

According to its findings, three key age-specific life stages emerge as times when people are seeking financial advice: 18–34, 35–55 and the over 55s. Each age group comes with different expectations and relationships with financial advice with 18- to 34-year-olds facing the greatest level of financial complexity. However, they’re the most proactive group when it comes to seeking financial advice to help them manage their finances more than any other generation.

Living yet dreaming while we’re young

Prioritising and building careers is often the financial goal of people in their twenties and thirties. The choice to buy a home or start a family are decisions that are considered alongside these goals. It’s a time period in which to lay strong financial foundations for the future, and there can be huge financial outgoings, including mortgages, raising and educating children or even starting a business.

As time goes on…

As we get older, financial priorities change and begin to consider choices such as retirement or leaving a financial legacy for our loved ones.

Why is consistent financial advice a good idea?

While it makes sense that major life events may prompt you to take financial advice, it’s important to remember that reviewing your strategy as you go along gives you the opportunity to be flexible when things change, as well as benefiting from your money being invested tax-efficiently and using all your allowance.

St. James’s Place’s Director of Partner Engagement and Consultancy, Alexandra Loydon, says:

“Big life events and milestones make people stop, assess and plan, and often they prompt people to undertake some financial planning too. While it’s clear that one of the greatest benefits of financial advice is the support it can offer in times of change or stress, the key to navigating those moments is putting a strong financial plan in place ahead of time, to ensure their money works as hard for them as possible, no matter what their circumstances are. Seeking advice to do so not only boosts mental and emotional well-being, but it provides the confidence to reach life’s goals and milestones in the first place.”

People’s relationships with their finances changes as they get older. But whatever a person’s need to begin their financial advice journey, St. James’s Place’s report highlights that the type of advice you want or need will depend on your age and stage of life.

 

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 in this chapter 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

“He took the SNP from the fringes of Scottish politics to the heart of government.”

–  John Swinney, Scotland’s first minister, speaking about former head of the Scottish National Party and Scotland’s first minister, Alexander Salmond, who passed away over the weekend.

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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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 14/10/2024