Global equities had another strong quarter, overcoming a bout of significant turbulence at the start of August. Weak US labour data put the ‘hard landing’ thesis for the US economy back on the table which, compounded by a surprise hawkish move by the Bank of Japan (BoJ), led the VIX volatility index to touch its highest level since March 2020, when concerns around the pandemic were at their peak.
However, sentiment improved as the quarter progressed, helped by central banks’ dovish pivot including the US Federal Reserve’s decision to cut rates by 50bps and the BoJ’s indication that further tightening would depend on financial stability. US economic data also proved to be more resilient than feared, helping global equities rise for a fourth straight quarter.
Meanwhile, China unveiled its most substantial stimulus package since the pandemic to boost its ailing economy. This helped the country’s equity market post its best quarterly performance since 2009. European and UK equities also advanced albeit by a smaller magnitude. Japanese equities, however, were the exception as they fell back for a second quarter following the BoJ’s rate hike.
Looking at market leadership, Q3 saw a noticeable rotation away from tech stocks. Real estate and utilities were the top-performing sectors within the MSCI ACWI, while industrials and financials also outperformed. By contrast, IT and communication services lagged after some disappointing earnings numbers called into question the elevated valuations. Energy was the weakest performer amid the sluggish economic growth outlook.
Indices (total return in local currency) | |
---|---|
S&P 500 | 5.8% |
Nasdaq Composite | 2.7% |
MSCI ACWI | 6.6% |
Nikkei 225 | -3.6% |
EuroStoxx 600 | 2.2% |
FTSE 100 | 1.8% |
Hang Seng Index | 21.5% |
SSE Composite | 12.4% |
Source: Bloomberg, for the quarter ending 30 September, 2024.