Nutmeg investor update: November 2024
The Nutmeg team
4 min
In October, investors were largely preoccupied with the Autumn Budget in the UK, and the closely run presidential election in the US. Most major asset classes were slightly weaker.
At a glance
- Equities and bonds were both weaker in October
- Investors digested the UK's Autumn Budget and the US closed in on the presidential election
- Closely watched corporate earnings were positive overall
What happened in financial markets in October and what were the main drivers of return?
In October, most markets - whether in bonds or equities - were down for the month. This was after a strong recovery from early August and the summer market turbulence.
Equity markets generally declined between 1% and 4% globally. US markets outperformed other regions once again, with the S&P 500 down less than 1% and similar performance from the Nasdaq. Both continue to outperform other equity markets so far this year.
Returns were more mixed in Europe, where equities lost almost 4%. UK shares performed slightly better, with the FTSE 100 large-cap index losing 1.5%. However, the FTSE 250, which focuses on smaller British companies, lost nearly 3% for the month. Sterling weakness may have contributed here. The domestically focused FTSE 250 can be more affected by costs rising when the pound declines.
One standout country was Japan, where the yen - after a strong performance over the past two months - reversed some of its gains. A weaker yen typically has an inverse impact on Japanese stocks. Japanese equities became cheaper for foreign investors as the yen weakened, which was one factor among others that helped the main Japanese index, the NIKKEI 225, to gain close to 2.5%. This made it one of the few markets to make gains during the month.
China-related stocks were strong performers in September due to economic measures taken by the Chinese government. This triggered a strong rally in September, and in October, they gave back a limited portion of the gains. However, they remain ahead of other regions for the period of September to end October.
The UK budget and the final weeks of the US election race weighed on bond markets
News on both sides of the Atlantic impacted bond markets significantly. It was an interesting month, in that economic data was generally neutral to positive for bond prices. Inflation data continued to cool, and the US job market remained stable, showing a positive trend without any unexpected strength. However, bond yields increased throughout the month (bond yields rising means prices fall).
Starting in the US, Treasury yields were impacted by the increased likelihood of Trump regaining the White House, which is seen as potentially inflationary and therefore not particularly favourable for bonds. US Treasuries declined.
Meanwhile, in the UK there were concerns surrounding the effects of the Autumn budget. The immediate reaction in the bond market was positive, especially during the speech. However, as more detailed information was released by the Office for Budget Responsibility (OBR), the bond market reversed all initial gains and much more. As a result, UK bonds had a poor month.
On our end, we increased our position in UK gilts towards the end of the month following the initial market movement. Our timing wasn’t optimal. We bought in before the post-budget shifts, but we think the current yield is attractive long term.
Earnings season coincided with October and was a good quarter overall for UK and US companies
As usual, the US remains the most closely watched market in terms of equity earnings due to the size of the US equity market, and results so far have been positive.
The typical analyst forecast was relatively moderate for the quarter, and corporate earnings outperformed expectations by a significant margin. Large tech stocks in the US continued to perform positively, with companies like Alphabet (Google's parent), Amazon, and Tesla largely exceeding expectations. Some, like Apple and Meta (Facebook's parent), posted slightly disappointing numbers or lower growth than anticipated, but most were still outperforming. Overall, earnings paint a favourable picture for profit growth, which is crucial for equity performance.
In the UK, there were some strong earnings releases from companies like HSBC and Shell, which was positive. Overall, the current environment seems to be supportive for company profits in both the US and the UK.
About this update: This update was recorded on 5 November 2024. All figures, unless otherwise stated, relate to the month of October 2024. Source for figures: MacroBond, Nutmeg and Bloomberg.
Risk warning
As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest. Past performance and forecasts are not reliable indicators of future performance. We do not provide investment advice in this article. Always do your own research.