WeeklyWatch – US runs out of steam before election

29th October 2024

Stock Take

US hits the wall

After experiencing a good run, US equities stumbled last week as a result of mixed corporate results and the uncertainty arising from the upcoming presidential election.

The S&P 500 has enjoyed numerous weeks of growth, so its slight dip is somewhat expected. The index dropped by just under 1% – a relatively mild reversal when put in perspective. Reasons for its drop were widely attributed to a few large companies.

Big business, big impact

McDonalds saw a fall of 5% in a single day after E.coli was reported at one of its restaurants (which was later traced back to the supplier). Apple also struggled as their share prices dipped after analysts revealed that orders for the new iPhone 16 have failed to meet expectations. The resulting drop of 1.5% had a significant impact on the wider index due to the size of the business.

However, this wasn’t a pattern across all large companies. Tesla made over 20% gains after posting a strong set of results.

Banking on a Federal response

Away from company-specific issues, the Federal Reserve released its latest check-in on the economy in its October Beige Book. The data showed a combination of attempts to moderate inflation and improvements in employment and fed the growing expectation that the Fed is likely to announce a 0.25% reduction in interest rates when they next meet.

Their next meeting will be undertaken in the shadow of next week’s presidential election – not only will a new president be named, but there could be a shift in political majority in one or both Houses of Congress.

UK still awaiting Budget details

On home soil, investors remain to tap their fingers in anticipation of this week’s Budget. There’s been wide speculation about a number of measures, including an increase in National Insurance contributions for employers, plus changes to so-called ‘wealth taxes.’

As well as these expected changes, the government is also predicted to make revisions to their fiscal rules in order to create more short-term fiscal headroom to allow for further capital spending options throughout this parliament. But sizeable tax rises – within the parameters of what’s been ruled out – are widely expected.

Heading east for a political shake-up

Over in Japan, the nation underwent a large change over the weekend. Its political structure shifted dramatically after the snap election resulted in the ruling Liberal Democratic Party (LPD) losing its majority in the lower house.

215 seats were won by the LPD and its junior coalition partner Komeito – just shy of the 233 seats required for the majority. However, they still remain the largest bloc. Prime Minister Shigeru Ishiba only took office a month ago and now faces a precarious position as he tries to accumulate more coalition partners.

The LPD have been in power for over decade, and for the vast majority of its post-war history, therefore the election results carry huge significance for the political direction of the nation.

The Head of Asia and Middle East Investment Advisory at St. James’s Place, Martin Hennecke, says that no matter what Japan’s leadership looks like, their high sovereign debt burden and challenging economy will make significant interest rate increases hard, nay, impossible.

He went on to state:

“Persistently low interest rates and a weak yen have resulted in negative real interest rates. This may actually support the market as Japanese investors grow concerned about rising inflation eroding the purchasing power of their large cash holdings. They may increasingly turn to equities simply as a wealth preservation strategy. Valuations still seem reasonable currently from a historical perspective as well as relative to global markets.”

Wealth Check

Familiarity with finances

Once you’ve found something good, why would you want to stop? St. James’s Place’s Real-Life Advice Report reveals that the average professional advice relationship lasts seven years.1 As the years go by, loyalty and satisfaction tend to increase, for example, nearly one third of people over 55 have retained the same adviser for 16 years or more.

Let’s break down the numbers

As part of St. James’s Place’s largest-ever consumer survey, they found that over 62% of respondents have never switched their financial adviser. Almost one in three said that the good relationship that they’ve built with their financial adviser is their core reason for staying.

Consistent financial advice has benefited over 10% of respondents with big financial goals in place resulting from major life accomplishments or moments, including getting on the property ladder (13%) or getting through challenging times such as divorce or grief (13%). For others, this included passing down money to their children or loved ones (19%).

For those currently receiving financial advice, 75% of them said they would recommend it to family and friends and among older clients, this figure increases to 86%.

Why is financial advice so valuable?

The Head of St. James’s Place Financial Adviser Academy, Andy Payne, stated:

“Financial advice is about much more than numbers on a page or graphs on a screen. It’s the relationship that drives this impact. Financial advice is about building deep, meaningful relationships, and as our research shows, these can last many years and span generations. Whether you’re navigating the early stages of wealth creation, planning for retirement or managing an unexpected life change, having a trusted adviser by your side can make all the difference.”

Source:

1The Real Life Advice Report was commissioned by St. James’s Place. Opinium surveyed 12,000 UK adults nationwide between May and August 2024. Quantitative data referenced is sourced from the first poll with a sample of 7,995 respondents, including those aged 18–34 (1,940), aged 35–54 (2,654), and aged 55 and over (3,401).

In The Picture

The polls in the 2024 US presidential election are tight. One interesting aspect of the electoral system is that a small number of ‘swing’ states (states that aren’t considered either safely Democratic or Republican), are expected to make a big impact on the final result. A close race could even lead to a contested outcome, which was seen in 2000 and 2016; there are concerns that volatility could arise prior to the final decision being made.

The Last Word

“We need to answer to the people’s criticism. That is how I will take responsibility for the loss of the election.”

Shigeru Ishiba, Prime Minister of Japan, as he responds to the results of the election 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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SJP approved 28/10/2024