Weekly market commentary

Last Updated: 1 Nov 24 5 min read

Market review

Global equity markets fell this week with earnings guidance from some of the largest US companies disappointing investors. Global bonds also fell as strong economic data releases in the US caused bond yields to move higher over the week. The week also saw the UK budget announcement and the release of economic estimates in the Eurozone. 

Alphabet, Microsoft, Meta Platforms, Apple and Amazon all reported earnings results for the third quarter of this year. Alphabet reported positive earnings noting better-than-expected sales for its cloud-computing business and driving more business for its search engine. Amazon beat estimates for the quarter with its e-commerce, advertising and cloud services all posting positive results. Whilst Microsoft and Meta Platforms posted solid revenue results, they disappointed with their guidance as investors grew concerned with Meta’s future Artificial Intelligence (AI) expenditures and the slower than expected integration of AI into Microsoft’s cloud platform. Apple’s earnings announcement sparked fresh concerns about revenue growth and ongoing weakness in China. 

In the US according to Automatic Data Processing (ADP), US private businesses added 233,000 to their payrolls in October 2024 which was the most since July 2023. Meanwhile, the latest US Gross Domestic Product (GDP) growth rate showed an annualised expansion of 2.8% in Q3 2024 with personal spending increasing at its fastest pace since Q1 2023. The Federal Reserve’s preferred gauge of inflation - the US Core Personal Consumption Expenditure (PCE) Index - posted a 0.3% gain from the previous month in September 2024 which was the highest print in five months. The better growth picture along with continued elevated inflation caused US bond yields to rise over the week. 

In Europe, the latest estimate of GDP Growth showed the Eurozone expanded 0.4% in Q3 which is the strongest growth rate in two years. This print also showed that the Germany economy expanded 0.2%, surprisingly avoiding a recession. Meanwhile the latest estimates of inflation in the Eurozone show that annual inflation accelerated to 2% in October 2024, up from 1.7% in September and above forecasts of 1.9%. In the UK, the Labour government announced its latest budget which we cover in the chart of the week below.

Outlook

Central banks are striking more dovish tones, following supportive inflation data and some signs of economic softening. The prospect of a soft economic landing in the US, accompanied by lower interest rates and stimulus in China should be good for the performance of most asset classes, but heightened geo-political tensions remain the most obvious near-term risk to this view. Investors will be awaiting the results of the US Presidential election with anticipation, with the outcome of the vote having the potential to plot different fiscal paths for the world’s largest economy.

Tactical positioning*

We currently have an equity overweight of +1.35%, made up of a diversified basket across the US, UK, Asia and Global Emerging Markets. This is funded from small Japan equity, European Credit and cash underweights. We have also maintained small overweight positions in US Treasuries and Real Estate Investment Trust (REIT)s.

*Please note that the tactical asset allocation (TAA) commentary does not apply to the PruFund range of funds. The TAA mandate is run by the Macro Investment Business (MIB) within M&G.

Please note that the below is relevant for all Prudential multi-asset funds. The tactical asset allocation comments relate to the WS Prudential Risk Managed Active and Passive ranges.

Movers table

Equities

1 Week

YTD

1 Year

S&P 500

-1.76%

20.97%

36.58%

FTSE 100

-1.19%

8.81%

15.26%

Euro Stoxx 50

-1.82%

9.82%

21.51%

MSCI Asia Pacific ex Japan

-1.63%

13.98%

28.08%

MSCI China

-1.90%

21.69%

22.26%


Source: Bloomberg as at 9:23am on 1.11.24