Overview
As we approach the final stretch of 2024 and start the run-up to the US presidential election, global financial markets continue to evolve:
- Historically, equity markets have turned in muted performance in the run-up to elections, followed by a post-election relief rally. With stocks already booking strong year-to-date gains, fundamentals might be a bigger market driver, together with election-related policy uncertainty.
- The Federal Reserve's decision to leave rates unchanged for most of 2024 as inflation fell effectively tightened monetary policy, contributing to rising downside risks. While September's 50bps cut was more aggressive than many anticipated, it's unlikely that this is the start of a new pace of rate cuts, with a downshift expected back to 25bps cuts at the November and December meetings.
- Europe's falling inflation provided the European Central Bank cover to start its rate-cut cycle in June, earlier than the Fed, while concerns linger that the Bank of Japan will revert to its old habits of tightening monetary policy too aggressively and too soon. The People's Bank of China has cut rates several times this year, but that has yet to turn around slowing economic growth in China.