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As we close in on the end of 2024 the financial news still seems to be dominated with the Autumn Statement, where we have seen the well-publicised £22bn black hole, left behind by Rishi and Co (although they dispute this) turn into an enormous £40bn proposed tax take by our new Chancellor, Rachel Reeves. This is the largest since Ken Clarke’s 1993 budget, which itself was the biggest since the war. There was little reaction in the Markets with the FTSE100© making modest gains and Sterling holding relatively steady. Longer-term potential for growth in the UK economy seems modest and only time will tell if the Labour Party can bring borrowing back under control and the UK Finances onto a more even keel.
On the global front, the news that Donald Trump’s Republican Party have secured an historic election win, having not only achieved the Presidency but regaining control of the Senate, is being fully digested and understood by the markets. Broadly, Trump has led with a lean towards free-market, business-friendly policies. This should help the domestic economy, but with his favourite word being ‘tariff’, the rest of the world is poising for their potential impacts, the US influence on other Geopolitical factors will also be keenly observed.
Throughout 2024, global stock markets have displayed notable resilience, despite economic uncertainties across major economies. Driven by robust economic growth, particularly in the U.S. and improving sentiment in Europe and Japan, global equities experienced strong performance in the year’s first three quarters. The S&P 500 has risen by over 25% by late November, marking one of its best year-to-date gains this century. This performance reflects positive momentum across both large-cap tech stocks and various sectors sensitive to economic cycles, like consumer staples and healthcare. However, inflation concerns, and ongoing central bank policy adjustments added layers of volatility, especially as rate cuts and labour market adjustments remain central in the U.S. outlook
Japan was also a standout, with its market seeing double-digit gains, partly driven by the Bank of Japan’s interest rate hike – the first in over 17 years. However, the strong U.S. dollar tempered returns for international investors in Japanese markets. Meanwhile, European stocks began a recovery from a mild recession last year, led by gains in manufacturing sectors and improving corporate earnings. The Eurozone and U.K., despite relatively slower growth than the U.S., benefited from renewed trade activity and resilient consumer spending.
While the year has been strong, risks such as geopolitical tensions, the new U.S. President inauguration and inflationary pressures could still introduce volatility, particularly if the Federal Reserve or other central banks shift policy unexpectedly. Most analysts anticipate a “soft landing” scenario for the U.S. economy, which could further boost equities if realised.
Over the longer term, investing in the stock market has consistently proven rewarding, but navigating market volatility is challenging. Historical data from the MSCI World Index, spanning January 1999 to July 2024, supports this with an average return of 7.39%. However, the journey to achieving these returns is far from smooth, as recent fluctuations in the stock markets show.
The Aquila Investment Committee meet regularly to discuss whether any changes to the portfolios and strategy are necessary. We are not Discretionary Managers, and we need to give you, our client, a positive experience through the effectiveness of our fund selection. The funds we recommend are agile and flexible to take advantage of an ever-changing series of events and impacts, and opportunities within investment markets. We select a range of ‘best of breed’ self-contained risk managed funds with assorted styles and holdings. We believe this is the best way forward to deal with the unpredictable world we live in, as markets do price in the risks as best they can, and that an active approach to managing the changing economic and political landscape will continue to be of benefit to long-term investors. Professionals sell expensive assets and buy cheap to generate long-term returns.
Our approach aims to deliver returns above their peers as we pool the best ideas into your portfolio. We continue to monitor the situation closely.
