Monthly comment October 2024

Index

• Markets
• Economy
• Geopolitics
• Conclusions
• Allocation
• Market data
• Event calendar

Markets

Global markets in October 2024 showed mixed performance, influenced by expectations on quarterly results, geopolitical tensions, and forecasts on the Federal Reserve's next moves. In the United States, the S&P 500 ended the month slightly negative at -0.1%, while the Nasdaq 100 rose 0.6%. The Dow Jones, on the other hand, closed down -0.9%. The Eurostoxx 50 fell -2.6%, dragged down by continued weakness in Germany’s manufacturing sector. Other major European exchanges also showed signs of slowing: the SMI closed -5.2%, the FTSE 100 -2.0%, and the CAC 40 -3.7%. The drop in the German manufacturing PMI highlighted structural difficulties, particularly in the automotive sector, amid the transition to electric vehicles. The ECB’s October 17 meeting resulted in a 25-basis-point interest rate cut, bringing the deposit rate to 3.25% and further easing its monetary policy.
Chinese markets rebounded significantly due to government economic stimulus measures and the expansionary monetary policies of the Central Bank of China, which cut the reserve requirement ratio and short-term rates. The CSI 300 index closed up 17.1%, marking its best monthly performance in a decade, while the Hang Seng rose 12.9%. Japan's Nikkei 225 also saw a moderate recovery of 1.1%, supported by the weakness of the yen, which surpassed 150 against the U.S. dollar, boosting Japanese exports.
The bond market experienced rising yields, with U.S. 10-year Treasury yields exceeding 4.25%, responding to expectations of tighter monetary policies from the Federal Reserve. This put pressure on rate-sensitive sectors, resulting in a decline in bond prices.
The cryptocurrency market saw a notable rise, with Bitcoin closing just below $70,000. This was supported by expectations tied to the U.S. presidential election, fueling optimism about a cryptocurrency-friendly Donald Trump victory. Spot ETFs on Bitcoin saw record inflows, exceeding $870 million in the past five months, attracting growing institutional interest. Bitcoin's correlation with gold and inverse movement against the Dollar Index further reinforced its role as a safe-haven asset. Gold maintained its safe-haven position, ending the month at $2,740 an ounce, up 3.0% from the previous month.

Economy

U.S. inflation showed further signs of slowing, with an annual increase of 2.3%, aligning with the Federal Reserve's expectations. The central bank has taken a cautious approach, with attention focused on early November and speculation of a possible new rate cut of 25 basis points. The Fed thus seems intent on maintaining a gradual easing cycle.
In Europe, inflation continued to fall, reaching the ECB's 2.0% target, while economic growth remains fragile, especially in Germany. The manufacturing sector has suffered due to weak domestic demand and reduced orders from abroad. According to forecasts, the German economy is expected to close 2024 with a contraction, attributed to structural difficulties in the industrial sector.

Geopolitics

The geopolitical landscape was marked by escalating tensions in the Middle East. Israel intensified military operations against Hezbollah in Lebanon, with targeted air raids provoking a strong reaction from Iran-backed militias. In response, Iran launched a missile strike involving more than 180 drones and missiles toward Israel, significantly increasing the risk of a wider regional conflict. Israeli operations also extended to Yemen, where Houthi militias intensified attacks on maritime traffic in the Red Sea, compromising the security of critical trade routes.
Meanwhile, in the United States, attention remains on the upcoming presidential election scheduled for November 5, with results expected in the following days. Uncertainty around the election outcome and its potential impact on U.S. economic and trade policies is a key factor for international investors, contributing to volatility in global markets.

Conclusions

Overall, the month saw a significant recovery in Asian markets, supported by economic stimulus measures in China, while U.S. markets displayed mixed performance, with moderate growth in the technology sector and general weakness across other major indices. In Europe, the economic environment remains fragile, marked by persistent challenges in the manufacturing sector, particularly in Germany, and weak domestic demand. Meanwhile, the bond market faced pressure as yields rose, reflecting recent geopolitical tensions. Looking ahead to November, risks posed by Middle East tensions and the U.S. presidential election could sustain high volatility in international markets. In this context, we maintain a cautious stance on interest-rate-sensitive assets, favoring exposure in the Healthcare, Information Technology, and Financials sectors, alongside safe-haven assets like gold, which continues to offer essential protection in times of economic and geopolitical uncertainty.

Allocation

Liquidity

Bonds

Equity

Precious metals & Commodities

Geo-tactical allocation

Switzerland

Western Europe ex Switzerland

North America

Latin America

Asia Pacific

Top sectors

1. Health Care
2. Information Technology
3. Financials

Market data (data as of 31.10.2024)

Event calendar

Legend