Market Outlook: Central Bank Action Drives Markets Amid Political Uncertainty in Q3

The third quarter of 2024 saw markets lifted by central bank moves; even as political upheaval created uncertainty. Both the Bank of England (BoE) and the Federal Reserve (Fed) cut interest rates for the first time in over four years, providing much-needed stimulus. The Fed's 50-basis point cut in September was particularly well-received, pushing markets to new highs.

While political developments—including a Labour victory in the UK and changes to the U.S. presidential race—caused some volatility, central bank actions and strong corporate earnings took centre stage. The assassination attempts on Republican nominee Donald Trump created temporary market shocks, but overall, investor confidence remained stable.

As the much anticipated UK Autumn Budget and US elections draw closer, market volatility is likely to prevail, while central bank support helped lift markets in Q3, investors are keeping a close eye on the political landscape and upcoming developments as they head into the final quarter of 2024.

Market Sentiment: Reversals and Resilience in Different Sectors

One of the key shifts throughout Q3 was the outperformance of small-cap stocks, which outpaced large-cap tech companies—reversing trends seen earlier in the year. Tech giants, which had previously driven much of the market’s gains, faced challenges, while smaller companies and defensive sectors like utilities and real estate benefited from the low-interest-rate environment created by recent central bank cuts.

Emerging markets also experienced a strong rally toward the end of Q3, thanks to China’s stimulus package, which boosted confidence in global trade and commodities. Investors flocked to sectors that were well-positioned to benefit from global economic recovery, particularly those linked to China’s growth efforts.

Top Financial News: Trump Leads Betting Markets, Boosting Gold and Bitcoin

Donald Trump over recent days has edged ahead in betting markets for the upcoming U.S. presidential election, an event that has the could have a significant impact on financial markets. Betting odds now give Trump a 60% chance of victory, up from 54.6% just days earlier. This increase in his election chances has driven demand for safe-haven assets like gold and Bitcoin.

Investors are turning to these assets as protection against potential market disruptions that could follow a Trump victory, predominately led by fears that he raises the risk of trade wars, and his provocative nature could lead to heightened uncertainty in markets.  

Important Information: Key Developments in the UK

• UK Public Sector Borrowing Rises in September: UK public sector borrowing jumped to £16.61 billion in September, up from £13.02 billion in August. This increase was driven by higher interest payments on government debt, which rose to £6.5 billion. The sharp rise in borrowing comes just ahead of the UK government’s budget announcement, raising concerns over the country’s fiscal health.
• Is UK Consumer Confidence Improving as Inflation Eases?: It has been reported that UK consumer confidence is showing signs  signs of improvement in October, with the S&P Global UK Consumer Sentiment Index rising to 47.3 from 46.0 in September. The data is suggesting growing optimism among households as inflation continues to slow, though the index remains below the 50-point threshold that indicates positive sentiment. However, personally I do not feel that the conversations I am having on the group are reflecting improved consumer spending ahead of budget. 
• UK Budget: Chancellor Says Cabinet United on Spending Plans: Chancellor Rachel Reeves has stated that the UK cabinet is united on the upcoming budget, despite reports of internal disagreements over tax rises and spending cuts. Reeves is seeking £40 billion in adjustments ahead of the October 30 budget announcement, which will address the country’s fiscal challenges while balancing public service funding.