Originally published at: Monthly market roundup – October 2024 – InvestEngine Insights
Welcome to the latest edition of our monthly market roundup…
October was a month packed with political events, earnings season and geopolitical conflict. In a month where only the Bank of Japan and European Central Bank met to set interest rates, investors had plenty to be busy with as the UK warmed up to a new budget and the US presidential election came to its last full month of rallies.
In the off-the-beaten track segment, we look at how despite the surge in profits for Meta, the perks at the tech giant are not to be abused. How a day trader went on one of the best financial streaks of all time before losing it all and how a successful exit out of a trading firm birthed a billionaire that is now targeting space for his next venture.
UK inflation drops and Labour deliver a budget
In the UK, we saw the consumer prices index (CPI) drop to 1.7% in September, the first print below the Bank of England’s 2% target since April 2021. Core CPI (excludes energy and food prices) came in at 3.2%, also lower than expected. Whilst RPIX (retail prices index minus mortgage interest costs) came in at 2%. So regardless of the way we want to measure inflation, we are currently at target.
Before we start celebrating on behalf of the Bank of England, it is important to pay close attention to the balancing act of bringing inflation under control whilst maintaining economic growth. The base interest rate was kept on hold for September with the next meeting scheduled for the 7th of November. As the base interest rate remains at 5% and the monetary policy committee prepares to digest the inflation and Labour’s debut budget in more than 14 years, markets are pricing in another rate cut of 0.25% for November.
Rachel Reeves’ red briefcase was priced in by many as doomsday for the UK, however, what we witnessed an hour or so later was much calmer and far better management of expectations than many had expected.
The news of a “blackhole” in public finances to the tune of £20bn (which in totality is less than 3% of the UK economy) was no surprise to anyone. Rather than a complete overall of the UK tax system, we came out of it with a nip and tuck to patch some of the funding gaps in the UK economy.
Although muted in terms of the seismic market reactions on the back of Liz Truss’s plan for unfunded tax cuts two years ago, Reeves must walk a tightrope to keep markets on her side. UK bonds tumbled as many consider the budget to be inflationary under the Labour government’s plans for borrowing and fiscal stimulus over the coming years.
Source: Bloomberg
UK equity markets gave up their gains on the last day of the month on the back of the budget as investors consider the implications for the country going forward.
UK stocks finished lower for the month with the FTSE 100 closing at 8110, a -1.45% decline. Gilt yields also increased, with the 2-year UK Gilt and 10-year gilt now yielding 4.44% and 4.45% respectively.
The US braces for the election
Over in the US, headline CPI came in at 2.4% for September, an inflation report that showed rent disinflation is making faster progress but at the same time some key service categories are still lingering. Core PCE (Personal Consumption Expenditure) came in at 2.7% (no change from August’s reading) and slightly ahead of expectations.
The stronger-than-expected inflation figure is likely to keep the Federal Reserve on alert as another 0.25% is currently being priced at next week’s FED meeting.
As we approach the finishing straight into the US Presidential Election, the polls as anticipated are neck and neck despite the volatility we have experienced over the last year.
For October, investors have also been kept busy with earnings season. 342 out of the 500 companies in the S&P 500 have reported earnings thus far, with most of the companies surprising to the upside on sales and earnings expectations.
Mixed earnings in the technology sector with AI spending being one of the main drivers has sparked a sell-off late in the month erasing the gains for the period.
US Stocks finished lower for October with the S&P 500 closing at 5705, a -0.92% decline. US Treasury yields rallied as US economic performance casts doubts on the outlook for additional interest rate cuts. The 2-year and 10-year treasuries finished the month with a yield of 4.17% and 4.28% respectively.
Fortunately, Europe has seen a much calmer month in terms of microeconomic events. Inflation is meaningfully below the European Central Bank’s target of 2%, currently at 1.7%. It is expected for headline inflation to tick up in the coming months on the back of energy consumption and seasonally but the broader outlook continues to be for generalised disinflation in the region.
The ECB lowered borrowing costs by 0.25% in October to 3.25% as expected, a deceleration in wage growth was the main driver behind the cut. Whilst another 0.25 % cut is being priced in for December, as profit margins narrow and the labour market stabilises the case for maintaining a deeply restrictive policy stance may become hard to defend.
European markets did not manage to escape the sell-off that spooked markets in the last week of the month, recent weaker activities and softer-than-expected earnings failed to impress investors in the region.
The Eurostoxx 600 declined -3.22% finishing the month at €505.39.
Commodities
In commodities markets, Gold continues its stellar run for the year finishing October at $2744 an ounce or higher by 3.51%. WTI crude traded higher by 2.35% finishing at $69.26 after a very volatile month dominated by geopolitical conflicts in the Middle East.
Currencies
On the currency front, October saw the Great British Pound decline versus the US Dollar and the Euro benefiting investors invested on a currency unhedged basis.
Sterling lost -2.82% versus the US Dollar, finishing the month at $1.2899. Compared to the Euro, Sterling losses were dampened to -1%, with the currency pair finishing the month at €1.1852.
Off the beaten track
In the off the beaten track segment, we meet about two dozen staff at Meta’s Los Angeles office who have been using their $25 meal credits to buy household items such as wine glasses and toiletries. Whilst staff are given daily allowance for meals, this should only be used for such. Allegedly those who were terminated had been abusing the system for some time. For a further read here is the link.
In the theme of financial gains that were short lived, we meet Christopher DeVocht, a carpenter from VAncouver Island who claims that within 2 years he had turned C$88,000 into C$415,000 (circa £240 million) trading Tesla options. In 2022 when the Tesla stock fell, his account suffered a total loss.
According to the legal filing DeVocht filed against RBC Wealth Management and accounting firm Grant Thornton LLP, he claims that the advice he received, geared towards mainly tax minimisation, was negligent and failed to take into account his level of financial sophistication. The lawsuit is ongoing, for a further read, here is the link.
Sticking with the theme of returns that are out of this world, we take a look at Baiju Bhatt who is the billionaire co-founder of Robinhood Markets. Bhatt is now targeting outer space in his latest venture which aims to create a constellation of satellites that will collect solar power.
If successful, the satellites will transmit the energy via infrared lasers to consumers on Earth. More information can be found here.
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